Evening Star Newspaper, December 31, 1928, Page 21

_, ‘BULLS SCORE RECORD STOCK YEAR; BOND T TWO MARKET REACTIONS BREAK SOARING PRICES Increased Public Interest in Securities Trading Is Chief Cause of Wall Street / BY GEORGE T. HUGHES. ispatch to The Star. YORK, December Punctuated’ by one severe in June and one violent in Decemper, the stock market of 1928 passes into his- tory as the greatost bull movement on record. Never before were so many precedents broken, never before was there such wide public interest, never before were such spec- nd sensa- Special 31— there 2 before nuch money Except for the light they throw on two ail-important questions, it would scarcely be neces- sary to review n detail the charac- teristics this most rem; B all ock market has been on_every | s tongue from January to Decem- | t has been discussed publicly and | ely by those well informed and y_those not informed at all; it been featured in the the magazines, preach bated abouf and even cartooned. No | market ever had so much publicity as | this one. Its story is so well known s essential to retell must precede | pending prob- i e ang attempts to solve the two p lems: Was It Period or Comma? The two points of vital interest are: First, whether the punctuation mark in | the December market was a period or a | U comma as it was in June; and, second, | Whether the stock market in 1928 dif- | fered from its predecessors in kind or | only in degree. In other words, is there 2 new era in speculation as well as in investment or is it the same old process simply magnified enormously? Let us take up the second of these two questions first. There is no doubt about the market differing in degree from other periods of rising prices. In volume the transactions were far grea er. On Friday, November 23, the day sales reached the total of 6.942,500 shares, the greatest for all time. On Saturday, December 8, the turnover was 3,744,500 shares, a total for a two-hour session not matched before that time. In the last two months of the year | 5,000,000-share days were common. When the total fell under that amount, the market was said to be dull, and yet only a year ago a 5,000,000-share day would have been deemed extraordinary. More issues were dealt in than ever be- fore, Listings were larger and the mar- ket was broader. Exchange Facilities Swamped. Human and mechanical facilities for conducting this unparalleled speculation | broke down repeatedly. It was neces- | sary to close the exchange every Sat- day during the month of May to en- able brokers to catch up with their bookkeeping arrears. In one week dur- ing the latter part of May an hour was | cut off the trading time so that the Stock Exchange closed at 2 in the after- noon instead of at 3, also for the pur- pose of giving time to post the books. Similarly, in November there was a | Saturday holiday necessitated by the | flood of buying and selling orders. Every device possible was employed to enable the ticker, the machine that records transactions, to keep up ‘with the market on the floor, and while progress was made the effort was only partially successful. The first move was to drop everything but the final figure of quotations, and when that proved in- adequate, the figure representing the number of shares was dropped. The idea was to give traders who buy and sell “by the tape” a chance to know how they stood. In the biggest markets of the year, however, the tape still fell consistentiy behind. On November 20 the last sale was printed on the tape at 5:42 o'clock, almost three hours after business had | stopped. This was before the figures for volume had been dropped. After that expedient had been adopted, the largest lag was on December 8, when the last sale was printed 74 minutes after the close, and that in a two-hour session. ‘The prodigious amount of money bor- rowed to finance the market is another indication of its record-breaking char- acter. Week by week Federal Reserve compilations and month by month the Stock Exchange reports showed brokers’ loans steadily advancing toward higher levels, Mania Seizes Whole World. ‘While statistics do not apply, it is in order to say something about the hold the mania took upon mot only the United States but the cntire world. Stocks were bought by residents of every large city in the United States, by a certain number in all the great capitals in Europe. One large wire house one day during the peak of the excitement received a 10,000-share buying order rom South Africa. A passenger on the Graf Zeppelin on the return of that airship 1o Germany radioed his buying order to his broker in New York, But it was not simply speculators and investors with sizeable resources that plunged. were, of course, the v ot the only one. b, nd women of small means drew eir money from the savings bank to v stocks. People who never dreamed of speculating before were dragged into the whirlpool. It may seem trivial and ¥ it illustrates the all-embracing character of the craze to cite the story of two youmg women who had heard about every one else making money in the stock market and who took a few hundred dollars apiece to a real estate office, thinking that any kind of broker couid buy securities for them. Now all these figures of magnitude, all these details of the world-wide ex- tent of the speculation prove nothing 8t all as to the market being different in kind from that in other bull markets. | They simply show that the world larger, communications are better es- tablished and that information er pseudo-information about financial al- fairs is more widespread. There is ing here to demonstrate that the 1 market was anything but a bull market such as has been seen many times in history, only on a larger scalc. Standards” Hailed. urse it was said time and time going up tha Reserve panics forever impossible, even that , there would never be again any violent collaps2. Such arguments are heard in every bull market. They sound plausible at the time, but somehow they seem to lose their force when values melt away in a single In one or two respects, however, there was something new in the market of 1928, something that ather markets had not witnessed. For one thing, the old and long venerated theory that bonds were safer investments than common stecks was rudely assailed. -Propaganda 1a favor of the stock and against the two reactions, | | tien in the upward movement? attempting an answer, let us compare in making the | Activity bond recefved a kindly hearing and made astonishing progress. At one time the question was serjously raised wheth- er financing by bonds would ever be- | come popular again. It was claimed | that except for financial institutions {and trusts which are restricted by law | there would be no purchasers for fixed | interest rate bearing securities. There | is no space here to go into the merits | of the argument. It was, however, one ‘0! the underlying factors in the up- ward movement in the stock market. he investment trust was also a com- tively new influence in the bull market of 1928, These organizations, miscalled trusts, were formed to sup- ply the demand created by the vogue | of the common stock investment the- | ory. Whatever the outcome of the pres- ent speculation, the investment trust | and the adherents of the new idea will |continue to be with us and to that | extent we have something in the mar- | ket which we have never had before; | something that makes this market dif- | fer not simply in degree but in kind | | from its predecessors. | .THE EVENING STAR, WASHINGTON; D. C; MONDAY, DECEMBER 31, 1928’ FARMERS' STATUS CONTINUES TO GAIN Advance in Purchasing Power of Products and Better Crops Aid Tillers. BY W. M. JARDINE, Secretary of Agriculture. By the Associated Press. American agriculture is in better shape than commonly supposed. This is attested by the recent advance in the purchasing power of its products, by its progress in mechanization, in the improvement of crops and live stock, and by its increasing co-operative control over marketing. Each season inevitably sces the over- production of certain crops, but agri- culture as a whole adjusts supply to demand with constantly increasing skill, as is evidenced by the fact that it has regained more than three-fourths of the buying power lost per unit of its products in the post-war price decline. Readjustments Made. Great readjustments have been made in farm enterprises since the war, gen- erally in a manner approved by eco- nomic science and vindicated by cash results. Farmers do not willfully ignore sup- What of the Future? Now we come to the other question | and perhaps the more intevesting of | the two, what of the future? Did the | reaction in December foreshadow a | rolonged decline or was it, like its| predacessor in June, simply an interrup- | Before | the two breaks and see wherein they | were similar and wherein they differ. | Both breaks came after the collapse of | a speculation in stocks. In June it was | the decline in Bank of Italy and Ban- | citaly stocks which gave the signal for liquidation in the general list, and in | December it was Canadian Marconi which performed the same service or | dis-service, as you choose. Neither of | cases was important in itself, but: proved to be warnings of what was to‘ come, In both June and in December the breaks were preceded by greatly in- creased volume. It was in May and in November that the Stock Exchange was compelled to declare holidays to catch up with business. Incidentaily, in this respect the market followed prec- edent. It is an axiom of speculation that the turn comes a} the peak of the turnover. It used to be said that when the stock market occupied the first page of the newspapers, either when prices were declining or when they were advancing, the end of the decline or the advance, as the case | might be, was at hand. This did not hold in 1928 simply because the mar- ket was of such magnitude that it demanded and received first page treat- ment long before it reached the crisis. Also, incidentally, the market deceiv- | ed old-time speculators without num- | ber. One such seasoned trader with | eyes intent on the tape, cynically re- | marked one day while prices were soar- ing, “No one over 40 years of age has made any money in this market.” What he meant was that the old rules did not seem to apply and particularly the one that said the time to sell was | when speculative excitement on the up- side reached the fever stage. He was | wrong. The rule does hold. The trouble | was that the fever stage is reached | aowadays at a much higher temperature than it used to be. Money Conditions Different. Neither the June nor the December | break came because of, any unfavorable | trade news. In hoth cases the specu- lation collapsed of its own weight from reasons inside the market and not from any outside developmen ‘The difference was in money conditions. On June 4 call money went to 7 per cent, which was the highest of the year.up to that time. In each case the increas- ed stringency preceded the market break, but there is a vast difference | between 7 per cent and 12 per cent. No such rate as 12 per cent has been m{lu"fid since t}l:e middle of Ilsgzo' a vear of ill-omen when one speaks or risin; prices for stocks, i e In appraising the future it is all im- portant that this money situation be | kept in mind. Making ‘due allowance for seasonal variations, there is no | propect of easier money until and if there is a downward readjustment in stocks and a cut in the amount of money tied up in brokers' loans. Then there must be some reasonable cor- respondence between the cost of bor- rowing and the dividend return on stocks the borrowed money is used to buy. l?ny one can figure this out for Dividends Out of Line. ‘There was no such correspondence during the greater part of 1928. Look at this table, for instance, of the yields on typical industrial stocks at the high points of the year: STOCKS, Motor Product Natjongl Tea. ° 2 American Radiator. Allied_Chemical. ox Film “A” P et tam o 2Ru3TaRLS! Utilities Score High, Probably a better showing would be made if earnings per share were used as the measuring rod instead of dividends; and still prices would be seen to be unwarrantedly high. The public utilities would make the most remarkable showing on this score. Many of them sold at one time or another at 20 or 30 or even more times earnings per share. The rail-| road stocks were not inflated at all in proportion to industrials or utilities. Such readjustment as may be neces- sary here will be due to money rates and not to earnings. Aside from money, the outlook is favorable. If the stock market declines it will not be because of industrial de- pression, present or prospective. Nor will it do assume that the market pays no attention to trade conditions. What- ever extravagances may have been com- mitted during the rise in stocks of 1928, they were not due to reckless bidding up of issues representative of businesses in an unfavorable position. In this respect the market was as logical as its most severe critic could demand. To take only few instances, there | was no speculation for the rise of any | considerable moment in the shares of | the sugar producers, in the shares of the railway equipment manufacturers, or in the shares of the coal producers, { More or less the same is true of the textiles. In other words the market left strictly alone the stocks of com- panies about the future of which there was any reasonable doubt. Rails Are Negleeted. Instead, speculation centered on ppb- lic utilities, on aeronautical stocks, on industrial issues and, in the closing months of the year, on copper equities. At intervals there was some interest shown in the rails but neyer on any such scale as in the rest of the list. Commentators have wasted many words trying to explain the relative inactivity | of the railroad stocks, but it was a very simple matter. The rails carry no ap- peal to the imagination except in the matter of mergers and as to these the attitude of the Interstate Commerce Commission was discouraging. _ The railroads * are hedged about with so many restrictions in the way of pu_bllc | | ply and demand conditions. Some branches of our agriculture have been expanded considerably since the war, but this is not necessarily evidence that the farmers responsible for the expan- sion were ill advised. Expansion and development are as good a ground for inferring health and vigor in agriculture as in other indus- tries. The progressive American farmer puts his faith in science and mechani- zation, and thus armed feels well equipped for the competitive struggle. Result of Energy. In large measure the recovery made by American agriculture from the post- war depression is the result of the farmers’ energy and enterprise. This should not cause us to conclude that no assistance need be given. The post- war depression had complex economic and social causes, and the Nation must accept its share of responsibility in seeking and applying sound and ade- quate relief. It is well to bear in mind, neverthe- less, that the most powerful remedial agency has been set in motion by the agricultural industry itself through in- creased efficlency and a better adjust- ment of crop enterprises to market re- quirements, Any governmental action that may be taken should strengthen and not weaken the curative influences brought into play by the farmers themselves,’ . Rail Passengers Less. Revenue passenger miles of class -1 railroads in the first nine months of 1928 declined 6.6 per cent from 1927, the Bureau of Railway Economics re- ports, and if the less in passenger traffic continues during the last quar- | ter it is ecxpected passenger revenue miles will be 33 per cent below the 1920 record and lowest of any year since 1909. With the exception of 1923, each year since 1920 has shown a decline. — regulation that even the most optimistic speculator was unable to paint a rosy future for them. 1t is quite different with stocks rep- resenting the radio and the airplanc industries. In the mood of Wall Street during the year just closing there was no limit yhatever to the possibilities of these stocks. Notice, too, that the situation is in fact highly favorable in regard to both. If one is inclined to find fault with the market, he can only do it on the ground that the enthusiasm was carried to excess. It is simply a question as to whether or not the dis- counting of the future was overdone and not a question as to the pleasing prospect. itself, Old Rules Forecast Prosperity. Or consider the electric light and power stocks. Here there is regulation Just as there is in the railroad field, but there are offsetting considerations. Electric light and power faces no com- petition such as the transportation in- terests are meeting. It is an unthreat- ened natural monopoly, for the output and services of which new uses are being found daily. Public utility stocks may have been put too high, but if so it was not because there is any argu- ment about their steady expansion, for as long a time as any one can now forsee. Electric manufacturing stocks are in the same category. 1, then, the advance was logical even though excessive, what is the inference with regard to the business future? It is an old theory that the stock market forecasts the course of trade, starting its rise before prosperity has made i appearance and reaching a climax.long before business activity does the same. In the same way the market turns downward while there is still no cloud in the industrial sky. Probably there are those who in these times are skepti- cal as to the accuracy of the market's pre-vision. Those who do hold to the old view will have to admit the market of 1928 seems to predict an era of un- precedented good times in these United States of ours, BY GEORGE DE WITT MOULSON. What has been happening in the stock market is so spectacular and ab- sorbing that the general public has had scant time or energy to devote to cot- ton duing 1928, When compared with 7000000~ share days and stocks of various chain store and in- dustgial concerns skyrocketing 200, 300 and even 400 per cent during the course of the year the quiet cotton market has proved strikingly lacking in dramatic fea- tures. But to the great textile indus- try that depends upon an ample sup- ply of reasonably priced raw mate- rials for its profits and the millions in the South to whom cotton produc- tion means the very essentials of ex- istence, the year 1928 has been filled with anxiety, interest and fulfillment. Not in a decade has one session of Congress appointed so many commit- tees for investigating subjects connected with cotton investigations not only ot its own authorized departments, but of the exchanges as marketing channels for a commodity representing a billion and a quarter dollars to the Southern producer, Months were devoted to hearings in both the House and Senate in an effort to sift evidence, secure data | and bring about such changes in Fed- eral statutes as were considered neces- sary to render laws more responsive to the constantly evolving methods of modern business. At no period in the history of the country has the farming problem re- ceived as much publicity, and as part George D. Moulson. BY J. C. ROYLE. America broke all records for promo- tion, production and profits in 1928. Even the banner year of 1926 and the wild orgy of buying of 1920 were over- chadowed. v The total income of the country approximated $90,000,000,000. The farm- ers gained over $900,000,000 in purchas- ing power. Retail trade aggregated $45,000,000,000 in volume. Railroad car loadings were heavy, winding up with a peak movement as the year closed. Operating efficiency gained 2.6 per cent and net operating income about 4.5 per cent. Mail and express movements were heavier than ever before. Freight move- ment by truck progressed over a larger mileage—270,000, and air mail routes now total 14,502 miles, with 102 station stops. The year wound up in a furor of holiday buying in which the sales ran approximately 15 per cent higher than in the big year of 1927, Foreign trade left the United States with a balance on the right side of the ledger between exports and imports of about $600,000,000. Not all industries were prosperous, but only two or three, chief of which were High Spots of the Business Year with their affairs in worse condition than a year ago. Commerce and trade suffered no set- back from the widespread practice of selling goods on the installment plan, although such sales totaled $10,000,- 000,000. ‘There was no lack of funds to finance any legitimate expansion of commerce, agriculture or industry, despite the money poured into the stock market. Expanslons were not excessive nor did production greatly outrun consump- tion except in the worst situated indus- tries such as coal, textiles, shipping, oil, sugar and paper. ‘Tourist, business did not drop. In fact it showed a marked gain for the year, cspecially in foreign travel. { Production of commodities gives no indication of a drop. There is no sign .that the new administration will do anything to change the basic business situation. The automobile and steel businesses face what may prove their biggest pro- duction year. Business now placed assures capacity production for many months to come in the major industries. Unforseen weather conditions, crop progress, and other factors may change | the situation despite all the favorable indications now so freely exposed to paper and sugar, wound up the year view. {Growth and Scope 'NEW CURB MARKS SET IN DEALS DURING YEAR 6f Market Provide New Standards—Bulls Dominate Enormous Transactions. specialty favorites which had been bid up to heights where their technical market positions were weakened. Heavy liquidation of accounts followed until those which had been amply margined as a result of accumulated paper profits became impaired to such an extent that forced liquidation was essential. ‘The corrective process finally carried prices to a level where the rank and fille of the trading element were again willing to venture on the long side, and the main body of stocks then went up- ward until the average was carried to a height never before reached. ‘The element of uncertainty usually prevalent in a national pre-election market was not in evidence in 1928. The possibility of disturbances in the political and business situation was ignored. Radio Stocks Attract Many. Then came the final and most drastic break, in December. Radio had held the speculative spotlight on the Stock Exchange. The favor in which this stock had been held caused attention to be directed to wireless, telegraph and related issues, a number of which had their market on the Curb. Canadian Marconi was selected as a speculative medium which held the prospect of sub- stantial price. appreciation. Alliances through consolidations and working agreements with leading American companies were reported to be under consideration, and the public rushed into the market with little or no regard for earnings, present and prospective. From a low of $3 a share, the price of Canadian Marconi stock was bid up to 282. Onee more officials of the company concerned criticized severely the wild speculation in the stock. When a high official of the company reiter- ated his statement made earlier in the year that at $3 a share the stock in his opinion was selling too high, the price broke violently until it was back over pretty much the entire ground gained from the low of the year. ‘Thousands of small investors were caught in the smash. This debacle had a sobering effect upon the general mar- ket, but not until the entire list, both on the Curb and on the Stock Ex- change, had suffered the most drastic reaction of the year. Declines on the Curb extended 10, 20 and in some in- stances as much as 50 points, Oils Fail to Flare Up. Nevertheless, at the close of the vear Curb stocks have a total market valu- ation of approximately $25,000,000,000, with par values in the neighborhood of | BY WILLIAM F. HEFFERNAN, | Special Dispatch to The Star. | EW YORK December 31.—The | Curb Market in 1928 broke practically every kind of trad- ing record on the books. America’s second largest stock market and the primary market for new and unseasoned securities the Curb during the year traded in a tremendous vol- ume of new offer- ings which a fren- zied public keyed to a high pitch of speculative enthu- siasm, eagerly ab- sorbed. For the first time in the history of this exchange total sales for a five-hour session crossed the 3,000,- 000 mark on No- vember 28, when S,UAG.aoous‘hnres ’ were dealt in. William F. Hefternan. WoTe desit b, scope of the Curb Market's operations | were nothing less than phenomenal. It was on June 27, 1921, that the | Curb formally opened its doors in the edifice it now occupies and commenced operations as an indoor stock market. Iis increasing scale of operations can be gauged by the increase in its activi- ties during the past eight years. In 1921 the total volume of stocks dealt in was 15,500,000 shares, with transactions in bonds involving $25,500,000. This was increased in 1922 to 21,700,000 shares and a bond total of $55,000,000. In 1923 the total share volume jumped to 50,900,000, or more than double t of the preceding year, while total trans- actions in bonds swelled to $90,000,000. ‘This was increased in 1924 to 72,000, 000 shares and $200,000,000 in bonds. | The following years saw the trading | total rise steadily until in 1928 it | reached the new record peak of 200,- | 000,000 shares of stock and $825,000,- 000 in bonds. Rise Twice Interrupted. The prolonged bull paign which carfledpth.raugh the lfl‘p-rt of 1927 continued throughout 1928, with but two major interruptions. With a back- | ground of unrestricted credit available {for speculative purposes, there ap- peared to be nothing on the horizon to halt the momentum which the se- curities markets had gathered. Invest- ment yields on high-grade bonds and preferred stocks declined to a level where they no longer were considered attractive. The bulk of the demand subsequently shifted to common stocks, which offered opportunity for profit be- cause of increasing earnings and ex- panding business operations. ‘The interruptions to the bull move- ment came first in June and then in December. And in each instance it was in the Curb Market that the first warn- ing signal was sounded. The June break, which carried prices down vio- lently on the Stock Exchange, had its inception in a sudden and drastic de- cline in Bancitaly shares on the Curb. Repeated warnings by officials of the company that there was nothing in the sltuation of the corporation to warrant the rapid advance in the market value of the stock went unheeded. From a low of 853 in 1927 the price soared to 223 in 1928 before the bubble burst. ‘The decline never ceased until the price reached the 100 level. Speculators Rush to Cover. ‘This incident threw a scare into the speculative element as to what might be expected to occur in other pool and Cotton Market Affect of the general subject cotton has had its full share. In retrospect, this fea- ture of the year’s events transcends in importance the mere record of price movements. In order to obtain the proper background it is necessary to recast briefly what happened during the closing months of 1927. The crop that year had proved a short one, only about 12,750,000 bales, and on what ultimately turned out to be false premises a general advance in prices had occurred during August and early September. The contrast between the 1926 record yield of 17,750,000 and the succeeding crop, 5,000,000 bales less, had inflamed the speculative mind. Dis- astrous floods in the Mississippi Valley at a time when mills of the world were consuming more American cotton than ever before created alarm over the out- look. ‘When statisticians in the various cot- ton centers counted the actual bales still left unconsumed from the previous enormous crop, it was found that the world’s carry over was in the neighbor- hood of 7,750,000, or about 2,500,000 above the 10-year average. This meant that the total actual supply was not the 12,750,000 bales produced last year plus an average reserve, but really a crop cqual to 15,250,000, Price Prediction Attacked. Early in September the Bureau of Economics, ' one of the important branches of the Department of Agricul- ture, issued a report of its experts stat- ing that a careful examination of cot- ton. prices over a period of years indi- cated a trend toward a lower level. These stydies were based on the worke ing out of supply and demand in the market price, influenced by certain general conditions surrounding the cot- ton industry. The market had already $14,000,000,000. This does not take into consideration some 300,000,000 shares that are listed without par value. The one group which did not share to the extent of others in the upward movement was the olls. the gmdotmmmnmmmwmh e industry was faced with the serious 8523""‘ of overproduction the oils had thoroughly ited. Efforts on the of prominent interests to remedy this unhealthy state of affairs made further headway during 1928 than they had previously. It is reasonable to assume that current prices for oil stocks represent more nearly actual values than those of most other grou With the unhealthy statistical position grad- ually corrected, the better-grade com- panies have been able to report in- creased earnings per share, with the re- sult that distributions of the Standard Oil companies will be the largest of any year in their history. It is estimated that dividend dis- bursements of Standard companies alone for 1928 will total approximately $221,567,410 in cash, as against $213,- 617,940 in 1927. Dividend payments in around the first of February, 1928. ‘This price prediction caused a storm of protest and members of Congress ‘were bombarded by letter and telegram from every section of the country, heap- ing anathemas upon the heads of t| bureau officials as being responsible for falling prices and the resulting mone- tary losses. As a matter of fact, in view of the 16,000,000-bale crop of 1925, succeeded by the serious overproduction of 1926, the world was so stocked with both goods and reserves of raw material that there was no economic justification for a rise in prices of more than 100 per cent over the previous year, Market in- terests appeared to forget that less than 12 months before aid of the Govern- ment had been invoked to prevent wide- spread demoralization in the South, owing to distress caused by a larger supply of cotton than the world could possibly. look after. Well posted au- thorities had reached the conclusion that 18 cents to 20 cents, as contrasted with 117, cents in New York in the Fall of 1926, represented a fair and equitable price for both producer and consumer. Prophecy Proves Accurate. ‘Though Washington officials had merely given circulation to. facts quite well authenticated by past experience, it became necessary to legislate against a repetition of any price forecast in the future. The motive of the prediction was to place all the facts before the %mwer in order that he might secure the advantages of prices then current and sell rather than hold back his cot- ton. Since all predictions concerning human affairs are subject to error, Con- gress decided to take no chances for the future, though in this particular in- stance the prophecy was 100 per cent accurate. begun to recede from an extreme price of 25 cents made a few days previous to the report, working steadily low contracts In New York touched 17 c¢xll>' strated this Fall when, with a supply ' tinue in 1929, he asserts,. How well founded in economic laws that view had been was fully demon- ECONOMIC FORCES INU.S. REVIEWED Bank Credit, Trade Condi- tions, Crop Output, Etc., Cited in Summary. BY WILLIAM F. WHITING, United States Secretary of Commerce. By the Associated Fress. Some of the more important eco- nomic forces which dominate the busi- ness situation as we enter the new year are credit conditions, the degree of accumulation of merchandise stocks and of speculation in them, the size of the crops and our current industrial output, the rate of wages and volume of employment and the prospects of foreign trade. | With respect to credit conditions 1928 | has been an extraordinary year. The outflow of gold, which began in the Autumn of 1927, continued during the first half of 1928, and caused a re- versal in the easy money situation that had prevailed for several years. Public attention has been fixed on the rise in the.rates on Stock Exchange 90-day time loans from 4! per cent in January to 7> per cent in the early Autumn, and the even greater rise in call money rates. Bank Credit Ample. It is well, however, to note that bank credit for commercial purposes has been in ample supply at rates ranging from less than 1> per cent higher in South- ern and Western cities to slightly over 1 per cent in New York City, while open-market rates for commercial pa- per have increased by only 1}z per cent during the year. Agricultural output during the year was about 5 per .cent larger than in 1927, and there was an even greater expansion in manufacturing production, but neither stocks of raw materials nor of manufactured goods have shown any general tendency to accumulate. There is no considerable speculation in com- modities, and wholesale prices average about the same as a year ago. Wages continue at a high level and unemployment has been reduced to a minimum. There has been a continued demand for additional worker§ by mer- cantile establishments, hotels and the automotive industry, and factories have once more been increasing the number on their payrolls. Labor confiicts in the coal and cotton textile industries were seitled during the past year, and relations in most sections of the labor world are now amicable. Auto Production High. Activity in the automotive and con- | struction industries has been sustained and is particularly noteworthy. Auto- mobile production has been at a higher level in recent months than at any earlier period, and eontracts for future construction have been substantially greater than in the corresponding period a year ago. Production of many related products, such ‘as iron and steel, cement, gaso- line and rubber tires, has been stimu- lated as a result of these developments. The textile and coal industries, how- ever, still lag behind. Foreign as well as domestic demand for the products of our farms and fac- tories is steadily expanding. the past year there has been an excep- tionally large growth of our exports of finished manufactures, especially auto- mobiles, machinery and petroleum products. Ia general it may be stated that both industry and trade are exception- ally active as we enter 1929. | | the fourth quarter totaled $64,877,432, 2n increase of some $14,000,000 over the previous quarter and $9,000,000 over the corresponding period last year. Final quarter disbursements are the largest ever recorded in any single quarter since dissolution of the old Standard Oil Co. in 1911, Many Foreign Issues Added. During the past” year the Curb has taken on more of an international aspect. Many dssues of foreign origin have been added to the list. There are now traded in through the medium of certificates of deposit more than 50 foreign company issues having a total capitalization of over 300,000,000 shares, | with a market value of more tha $5,000,000,000. More than 40 cities outside of York are now supplied with the ticker system and plans are under way for extension of this service as far West as the Pacific Coast and as far South as Florida. Arrangements were completed just -before the year end for the installation of a special ticker W] will be used for the transmis- sion of sales volume in order to lighten the burden by the regular ticker. At the close of 1927 seats on the Curb Exchange could be purchased for $67,000. They now command $170,000, with few offered at that price. Current prices represent an a gate value of $93,500,000 for all memberships. When the Curb Exchange opened for trading in 192 memberships could be obtained for as low as $3,750. 1,745 There are now ngg;cg;imn(t’elfm . and or- stm:kzl,x;'fi'(:l)il dome::lh: o ef nds on the Curb trad list. Of the total number of swckliuflm'e remain only 25 in the so-called “penny” class. ~This is the direct contrast to former years, when the bulk of the n New | Curb BY CHARLES F. SPEARE. Speclal Dispatch to The Star. | EW YORK, December 31.—Buoy- | ant, of great size, its prestige at home and abroad increased | by its ability in the first half | of 1928 to absorb enormous | amounts of low interest bearing issues, the American hond market since July | has turned completely around, en-| countering nearly all of the obstacles | that at some time confront the in- vastment situation. | It ends the year | with underwriting | houses and dealers bewildered and un- certain es to the future of their bus- | iness. It has been a year of intensc competition from every quarter. This was first between issuing houses th:mselv;cs o who went out after new Charles F. Speare. o0 O e and paid prices for them so high that the public would not buy them. This led to the congestion from which the market suffered from May until October. Next came the competition with money rates, which entered the situation last Spring on the advance in the Federal Reserve discount to 4%z per cent—the popular bond coupon rate of that period—and was intensified later by the rate of 5 per cent and a six-month era of from 5% to 7% per cent time money. Finally bonds came into serious competition with stocks. The public that flooded ‘Wall Street with its buying orders for weeks before and after the election scorned securitles that move only by eighths and quarters if they move at all, Even many of the old-fashioned investor type abandoned the bond mar- ket for the thrills that come from hold- ing “equities” that gained more in one week than would a bond in a genera- tion. Convertible Issues Favored. ‘The rivalry between bonds and stocks, however, did not stop at this point. So intense was the passion for speculation and so insistent the demand for a share in profits that many borrowers were compelled to give a concession in the form of stock warrants with each bond issued. Obviously, this made it more difficuit for those with straight mort- gages to sell to interest the average in- vestor. Along with this was the spec- tacular advance in quite a large group of convertible bonds, which for two months completely overshadowed all other members of the bond list. ‘This, however, is not a new develop- ment. It has occurred in all other eras of speculation when the public is ob- sessed with the idea of making quick and substantial profits from stocks and will not buy bonds unless they have a convertible or some other optional fea- ture promising a share in anticipated corporation profits. It may now be more lasting than in other years, for there is unquestionably a trend away from bonds and toward stocks, due to the success that the public at large has enjoyed in the latter since the war and cultivated by the policies of 'the invest- ment trusts and the advice offered by the growing body of investment coun- sellors. . Going back into the early part of the year we find bonds then still influenced by the abundance of capital and the low rates of interest which had carried over from 1927 and were promoted by the Federal Reserve policy in its 3': per cent discount rate of the previous August. Most of the high prices for Government securities and for many first mortgage railroad and public utility issues were established in January. The return on them at that time approxi- mated those of 25 years before. In the general belief that interest rates would be low for a long period of time, pre- dictions were made that even the pre- miums on 315 and 4 per cent bonds in the early part of this century would be duplicated. In December the Treasury had offered $250,000,000 of 3'4 per cent one-year obligations and had received subscriptions covering the issue four times, It was these notes that were refunded this month at 4, per cent. Speculative Fever Rises. At the end of January it began to be apparent that the country was in Fapidly geiting out of contrel. "o eheok raj ge! out of cont this the Federal Reserve raised its dis- count rate of 4 per cent. This failed to have the desired effect. It apparently did not disturb holders of bonds or issulng houses. Prices for corporation mortgages continued to advance. New bond and stock offerings flooded the markets from January until May. It was & period when a corporation thau could not sell a 5 per cent bond was looked upon as in poor credit. The ma- Jjority offered and sold 4!> per cent issues. ~Some were bold enough to attempt their refunding with 4 per cent Curb trading was in lssues selling be- low the doll:r level. - L5 ed by Farm Problem l | ! (production plus carry-over), estimated about at 1,500,000 bales less than last year, the market price of cotton only Just succeeded in crawling above the 20-cent figure at the close of November. During the marketing season of the past four dm\;nthl muucfln: o'to bales hnhv]l: passed from producing consum channels between 18 cents and 19 cents, though the world’s supply of American cotton crop plus carry-over, is consider- ably smaller than a year ago, when the department suggested that 23 cents to 25 cents was likely to prove a higher {e\;xe!l dthln could be permanently main- ained. But before reviewing the events lead- ing up to this year's reduced supply of raw material, one other phase of the in- terest taken by Congress in the subject of cotton should be noted as an out- standing feature of 1928. Since the passage of the cotton fu- tures act in 1916, regulating the ex- changes and specifying the various grades and staple that can be legally delivered on contract and requiring that | all cotton so delivered shall first pass official inspection, great changes have | occurred both at home and abroad. Northeérn mills have been moved South. The steadily expanding area of cotion ; cultivation to the westward shifted the | center of production farther and farther Increasing percéntage of ih d ncre: percentage of the crop, and, the great port of Houston has been | opened up, rivaling Galveston and Newl Orleans. PHONE O0UTLOOK BRIGHT. During 1928 the Bell system has had a satisfactory growth, p arly in long-distance business, according to Walter S. Gifford, president of Ameri- can Telephone & Telegraph Co. There is every indicatlon this growth will con- Gulf ports have handled an; palan bonds at & substantial unt, however. In the first half of 1928 the total emission of all corporation, foreign gov- ernment and municipal financing, either with bonds, notes or stocks, was $5,690,- 000,000. Ths wias $350,000,000 greater than in the same six months of 1927 and over 40 per cent larger than in the first half of 1926. Of the total about 30 per cent was for refunding purposes. Nearly $1,000,000,000 of 42 per cent bonds alone were issued, mainly by the ublic utilities and the railroads. These low coupon issues retired old mortgages or preferred stocks with rates substan- tially higher than the refunding bonds, and therefore, greatly to the advantage of the borrower. For instance, the re- funding operations of the public utilities alone in the form of bonds were over 50 per cent of their new capital issues, while two-thirds of the new railroad bonds placed were for a similar purpose. There was at this time nearly as great a craze for these low coupon bonds on the part of the institutions as developed later with the public for stocks. Most of them went immediately well above their subscription prices. The expecta- tion was that very soon all of the 4 per cent public utilities would sell at a | premium even though they were not “legal” under their new status in New York State. ‘Those that were “legal” | sold in some instances as high as a 44 per cent basis, Sense of Values Lost. Looking back on this period one has the feeling that the underwriters and the investors in April and May had lost their sense of values almost as com- pletely as the public that later lost its ce in stock speculation, for there was every warning that money rates were to be higher in view of the of $500,000.000 gold and the Reserve policy, whether effective or not, of keeping interest rates high in order to maint the equilibrium of the stock tnL only whe; ral 415 it It was when sevel per cent foreign government bonds were offered and refused the iblic and then quickly drop) well below their sub- scription ices that investment dealers woke to the situation and found them- selves with a staggering amount of un- | since the war. RADERS FIGHT HANDICAPS INTENSE TRADE RIVALRY AFFECTS BOND DEALINGS Convertible Issues Have Been Favored by Traders During Year—Money Rates Depress Sales. additional bonds for which there was no_market. This led to the quiet panic in bonds which developed when the Federal Re- serve discount rate was raised to 5 per cent in July, the effects of w did not wear eff until October. and August were the two most try months that investment houses have h: There were days when bids could not be obtained on Gove ment bonds or on the very best munio: pals and when the offer of 50 legal rails or pubiic utilities would have broken their market wide open. ‘The banks were forced to sell in o der to correct their condition with the Federal Reserve, from which they had been unduly borrowing in order to assi customers speculating in stocks erty bonds declined 3'% sury lost as much as 615 to 7 points. of the 3% per cent Tre ries, which had been used in refunding the third Liberty 4'is, went to a substantial dis- count. The average price of the leadina railroad mortgages declined 6 points, that of public utilities about 3 points ith a similar loss in industrial bonds. Tax exempt issues of States and other political divisions which had been sell- ing between a 3% and 4 per cent basis declined until they were available on rx;olxg a 4 per cent to a 4% per cent yield. There had been, along with the issu- ance of low coupon bonds, many offer- ings of preferred stocks, the better ones with a 5 per cent dividend and others cf lower quality at 6 per cent. These suf- fered severely in the readjugtment to the new money market conditions and have never recove One of the last to be brought out was a 5 per cent pub- lic utility at 95, which this month hos bfen selling at about 83. New Issues Restricted. It was only by the patient nursing of the bond market during the Summer monins and in the carly part of the Autumn and by withholding from it all but imperative new issues that it re- gained its health. In the September quarter new financing was smaller than for any similar period in years. There were practically no new foreign loans. Gradually the insurance companies took up the floating supply of both new and old issues and with the cutting of prices to a figure that appealed to the public, the underwriters and the dealers were able to distribute bonds they had been carrying since Spring. More recently the volume of new issues has increased. Total financing has been heavy but only because of the large amounts of stocks put out by cor- porations and by investment trusts. At the end of the first 10 months of 1928 total financing had dropped well below that of the same period of 1927 although ‘it had been well above it in the first 6 months. For 12 months the final figures will show a decided reduction in Il)cgnzxg volumes compared with 1927 and The difficulties that besct the Gov- ernment in its financial operations this year are typical and emphasize the de- gree. to. which even the most astute bankers may be misled in a period when money rates are controlled by a public whose speculative passions have been unleashed. When the 4! per cent Treasury notes became due December 15, 1927, they were retired, as stated above, with 31{ per cent 1-year notes, and in January 312 per cent Treasury ngtes were offered in exchange for the third Liberty loan bonds. In March 3! and 3% per cent certificates of indebted- ness, the one for 9 months and the other for 12 months, were sold and in June 4 per cent six months’ notes were disposed of. Money Trend Upward. The 312 pe: cent January notes very soon went to a discount. Various offers | to_exchange the third ‘Liberty bonds for new Government securities with | only lukewarm response, as the hold- | ers of the Liberties obviously could see little advantage in taking a lower coupon issue, with the trend of money advancing so rapidly, in exchangs for one that would at least yield them 4. per cent to maturity. In July, abous a week before the Federal Reserve dis- count rate was raised to 5 per cent, a new issue of moderately long-term 395 per cent Treasury bonds was offered. This issue had an unfortunate market and later sold at a discount of 2 per cent. In September money conditions were S0 lmnge“ed rg thlfi,y t}u T compel emp or refunding pur- poses & 412 per cent nine-month note, and in October an offering of 4% per cent notes was made, the highest since 1921. Instead of retiring old bonds Wwith new issues at a lower rate, as had been possible previously, the Treasury was compelled in practically every in- stance to increase the rate on the new certificates over that of :"» old, this increase in the most having been as much s Bond Market Leit It will be seen, therci ever much advantage .y have had from appreciation in the mar- ket value of stocks, this same condition has at times put the bond market flat on its back, greatly inconveniencing corporation borrowers and embarraseiy the United States Government in ifi program of refunding its war loans. This has been responsible for the se- vere criticism leveled at the Federal Re- serve by numerous investment dealers Whose business has been shot to pieces by the maintenance of a 5 per cent dis- count rate, which is higher than the interest rate on the average quality cor- poration bond and which policy has undoubtedly been responsible for the time money rates of 71 per cent, under which no bond market can hold up. ‘The banks, which are the largest cus- tomers of bond houses, both for domes- tic and foreign securities, have been compelled to sell bonds. More than this, they have been unwilling to buy investment securities when they could employ the‘l‘rtrestcrve funds in the call money market at an average as high as that obtaining d ntgm m);lr.g six months. The same is true to a lesser extent of the investment trusts. Outlook for 1929. What is to be the effect on the bond market in 1929 of all of the wounds it P S bvicusly the Rt chang viously the first cl e that must take place before the market recovers its poise is in money rates. Bonds and stocks, it is true, did advance for a while together last Spring. But bonds can- not rise in competition with a move- ment in stocks so broad that it takes capital out of the investment market and distorts the judgment of the aver- age bond buyer, whether he is a private individual, the investment manager of an 1 tion or the president of a bank. Until money rates decline to & point where it is no longer possible for !haeaxzmmnortheb-nkwempwy its funds in Wall Street, it will be diffi- cult to stimulate the market for invest- ment securities. There are always buy- ers for bonds under the most adverse clrcuml:ae‘:. a\ufil:'nmmmnnu com- panies, 3 and savings banks, for they are limited by law or by ac- cepted in what they may pur- chase. It is only, however, when the public enters the market freely that it is able to absorb the normal flow into ¢s0ld bonds and commitments to buy | it of new securities..