Evening Star Newspaper, February 22, 1929, Page 13

FINANCIAL. MERGENTHALER LINOTYPE CO. Brooklyn, N. Y., February 19, 1029, N5 1w ividend A auarterty ‘dividend of 3130 aua an extrs vidend of each of the 236,000 ar_at 9. me nsfer books will not be cl aBO L sc'r'um!na%nom I WILL SELL Estate Mortgage & 4, ortgage & Dis- ase Ball @ 61 Insurance “‘new. ite Ins. Bid . pld. %. ite: Bla. n 1346 First Mortgage Money There is no limit to the amount of money we have available for construction or refi- nancing loans — and your application will be given immediate consideration — m a k- ing a prompt report to you. Always Low Rate of Interest wad Commission B. F. SAUL CO. Main 2100925 15th St. 6% NOTES Secured by First Mortgages Safe—Conservative Make your savings and surplus funds work for you at the highest Inter- in finanecing est rate consistent homes and in the with absolute sale of these se- satety. curities. Wm. H. Saunders Co., Inc. 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Denominations From $250 to $1,000 Short Maturities Send for our 24-page bogk- let, “The Success Pla - REALESTATE MORTGAGE & GUARANTY CoRPORATION Capital Resources $ 3,400,000 24 JACKSON PLACE ’ VALL STRETQUET ASHOLAY BEGNS Three-Day Rest Appreciated by Banking and Broker Fraternity. By the Associated Press. NEW YORK, February 22.—Wa% Street was practically deserted today and will remain so until Monday. As today, Washington's birthday, is a legal holiday, all banks, security and com- modity exchanges were closed. this week to the lowest volume in about two moriths, stock exchange members decided that they could afford to pass up the two-hour Saturflay session, and following their example, the curb mar- ket and most other markets decided to take a three-day vacation. The banks will be open as usual to- morrow, and as the Chicago Board of Trade will hold its regular session, the wheat market on the New York Pro- duce Exchange will remain open. The New York Cotton Exchange will be closed for trading, although its offices will remain open. The rubber, metal. silk, coffee and sugar and cocd ex- changes will be closed. Unlike the Saturday Stock Exchange closing of two weeks ago, clerks and office forces will have a real holiday this time, as the exchange and mem- ber offices will be closed. Stock mar- ket traders left for their three-day holiday in a rather more peaceful frame of mind, as stock prices, despite the | reduced volume of "trading, generally turned upward this week, after the sharp breaks of the past two weeks, resulting from the Federal Reserve Board's stricture on excessive use of credit for speculation, and the Federal Reserve Advisory Council's unqualified approval of the board’s stand. ‘The Federal Reserve directors meet- ing, after the close of yesterday's ses- sion, was not perplexingly protracted as on the previous week, when the di- rectors sat until nearly 7 p.m., and brought no change in the rediscount rate or other disturbing development. Wall Street Briefs Structural steel orders in the week ended February 19 increased 6,800 tons over the previous week to 24,500 tons. Inquiries were for 54,800 tons, a gain of 21,800. Directors of the Inland Wire & Cable Co., Sycamore, Iil, have voted to ac- cept the offer of the Anaconda Copper Mining Co. for merger with the Ana- conda Wire & Cable Co., its newly organized subsidiary, through a share- for-share exchange of stock. Gold imports in the week ended yes- terday totaled $1,195,000, compared with exports of $251,000. Of the imports $1,000,000 came from Canada and the rest chiefly from Latin America, the New York Reserve Bank re- ports. The exports consisted of $200,000 for Venezuela and $51,000 for Germany. was no change in gold earmarked for foreign account. James H. Taylor, dean of American coffee_brokers and a member of the New York Coffee & Sugar Exchange, Inc, for more than 40 years, retired from active business today. Floor traders gave him a loving cup. He served as president of the Exchange five years and treasurer nine years, ‘The Chesapeake & Ohio Railway has ordered 2,000 hopper-bottom gondola cars, to cost $4,350,000. The American Car & Foundry Co. will build 1,500 and the Richmond Car Works 500, Stockholders of the Goldman Sachs Trading Corporation today approved an increase in no par capital stock to 10,000,000 shares from 2,500,000 and acquisition of PFinancial & Industrial Corporal i tion. DECLINE IN-BROKER LOANS IS CONTINUED Special Dispatch to The Star. NEW YORK, Pebruary 22.—Brokers’ loans again declined last week, falling $91,000,000 to a total of $5,477,000,000, as compared with the previous week's total of $5.568,000,000, according to the statement of condition of member barks in New York City, released last nighs by the Federal Reserve Bank of New | York. the total $192,000,000 | below the peak of $5,669,000,000 estab- lished two weeks ago on the same day that the Reserve Board in Washington issued its now famous warning. The two weeks previous to the board’s warn- ing saw brokers’ loans rise $226,000,000. New York member banks decreased their loans on securities to brokers and dealers for their own account by $74,- 000,000, while loans contracted for the account of out-of-town banks were down $73,000,000. The loan item “for account of others,” however, showed an increase of $56,000,000. This -is the item representing loans in the call mar- ket by corporations and institutions having large cash funds, which have found recent call loan rates too attrac- tive to resist, It has been widely asserted that the Federal Reserve is powerless to control loans of this Clnsai and for this reason the increase shown in the loans for “others” last night, in | the face of substantial decreases on the | part of both member banks and out-of- town institutions, aroused great interest. Member banks have now cut down their loans to $1,023,000,000, the lowest figure of the three divisions into which !]usns are classified. Loans for account of others stood at $2,668,000,000, more than two and a half times the figure for member bank lending. These fig- ures compare strikingly with those of the reserve's statement for May 18, 1928, at which time member bank loans to brokers reached their high point at | $1,131,000,000. Leans made for account | of others stood at that time at $1,534,- | | 000,000. From that time forward the | increase in this latter item attracted | wide attention by reason of the fact | that it represents an eclement. beyond | the direct control of the reserve bank end has comoletely offset the efforts cf the member banks to bring about a de- ‘creasz in brokers’ loans, Bureau of Lahor Names Articles Which Are Cheaper, Retall food prices decreased approxi- mately 34 of 1 per cent from December 15, 1928, to January 15, 1929, according to Bureau of Labor Statistics. Prices compared with a year previous showed a decrease of about 1-3 of 1 per cent. Compared with January 15, 1913, prices showed an increase of about 57 per cent. During the month from December 15, 1928, to January 15, 1929, 13 articles on which menthly prices were secured de- creased as follows: Strictly fresh eggs, 13 per cent; storage eggs, 8 per cent; butter, 3 per cent; oranges, 2 per cent: sliced bacon, lard, rice and raisins, 1 per cent, and round steak, chuck roast, cheese, vegetable lard substitute and coffee less than % of 1 per eent. Eighteen articles increased: Cabbage, 25 per cent; onions, 7 per cent; legz of lamb, 6 per cent; potatoes, 5 per cent; pork chops, hens, navy beans and canned tomatoes, 3 per cent; plate beef, sliced ham, canned corn, canned peas, runes and bananas, 1 per cent, and sir- in steak, rib roast, e rine and e, less than ¥ of 1*per vE 2 BY KENNETH S. VAN STRUM. NEW YORK, February 22—Bond men feel they have a legitimate grudge against speculation in stocks. Not only has the unprecedented bull market in stocks drawn the attention of erstwhile conservative Investors away from bonds, but in addition it has made such heavy demands upon credit by offering such high rates of interest against call loans that many investors who would notmally invest in bonds have been lending their funds in the call money market. most crushing blow of all, however, is that the Reserve banks, in their at- tempts to curtall brokers' loans, have been forced to pursue a policy which has caused serious declines in high- With stock trading having fallen off | Brade bond prices, but to date has had little effect on highly speculative stocks. The bond market so far has suffered most from the high money rates. Open Market Policy. Until a year ago the most effective weapon the banks had to control the credit situation was their “open market policy.” serve Board saw that it needed a firm hold on the credit situation in order to prevent inflation or deflation. It believed that stable prices and production were very much needed and that a closer control over credit would HioH GRADE RalLs | &5 -1-100 - 90 'SECOND GRADE Mujr‘w W{ st INDUSTRIAI i 1 T T e 5 2 b 9 allow it to maintain an_equilibrium which would benefit all. Consequently, the “open market committec” was formed to buy and sell securities for the account of the Reserve banks for the purpose of influencing the credit sit- uation “with primary regard to the ac- commodation of commerce and business and to the effect such purchases and sales have on the general credit situa- tion.” The banks found that the most ef- fective way to tighten credit when busi- ness and commodity prices showed signs of expanding too fast, was to sell the Government securities which they held. When business and prices were needing funds they eased credit by purchas- ing Government securities. This manip- wiation of the volume of Government securities held in the Reserve banks' portfylios has undoubtedly played a very important part in creating the generally g:oupero\u business conditions which we ve experienced since 1922. Effect on Bonds. The principal objection to this plan is that it sometimes brings about a difficult situation in the market for high-grade investment securities. This has bern particularly noticeable during the last two years. In 1927 when the reserve banks eased the credit situation by buying Gov- ernment securities in an effort to re- distribute our excess gold among Euro- pean countries, the bond prices rose. 8ince a sudden change in credit con- ditions always affects the highest grade issues most because their interest rate is closer to the level for open-market borro , the prices of Government, municipal and legal rails rose most sharply. They were followed by more moderate rises in industrial and public utility bonds. Very soon, however, the reserve banks saw that while their easy-money policy had been effective in causing large ex- ports of gold, Federal credit was at the same time finding its way indirect- ly into the security markets. They decided to cBI’!VEnl this diversion of reserve funds and began to tighten credit by selling Government securities. During the first half of 1928 they sold 400 million dollars’ worth of Govern- ments and bond ly. Again clined most Wl ylelds suffered least. bonds with stock warrants or those con- vertible into stock, actually rose, fol- lowing the trend of the stock market. Fall Recovery. . The bond market saw signs of ho) somewhat later when in September the reserve banks bought moderate amounts of Government securities in an effort to ease credit conditions to take care of Fall business requirements. Bonds recovered temporarily from their Mid- summer lows, but they did not hold their gains, for credit conditions became more acute as larger and larger sums of credit were being poured into brok- ers’ loans and as business continued to expand. The reserve banks did nothing to ease the credit situation, for their attention was fixed on the mounting volume of brokers' loans. Finally, on the fourth week of January they began to sell Government securities again and bond prices declined to the lows reached last Summer. But still brokers’ loans mount- ed and last week the reserve banks ain began to sell Governments, with the result that the prices of Govern- ment, municipal and legal rails dropped sharply below the low levels of last Summer. Most public utility, industrial and foreign government bonds did not suffer so much, their yields being higher and not so sensitive to open market rates. Many convertibles and bonds with stock warrants, however, have de- lv:)lei‘r’\td sharply as security prices drop- 90 100 Future Bond Prices. As long as the reserve banks see fit to tighten credit by selling Government bonds in an effort to prevent the flow of bank credit into brokers' loans, de- clining bond prices must be expected. The highest grade bonds will suffer most as long as this policy is continued, but they will be quickest to recover once credit conditions becoms easier. Public utllity, industrial and foreign govern- ment issues will probably not decline so sharply, for their higher yields make them more attractive to investors. Con- vertible bonds, and bonds with warrants which have advanced sharply with the stock market, should continue to follow the general trend of the stocks. As long as credit conditions remain tight, however, not much of a recovery in the general bond market can be expected. (Covyright, 1929.) HEADS ADVISORY COUNCIL. Frank O. Wetmore of Chicago was re- elected president of the Federal Reserve Board advisory council at the recent meeting held here. B. A. McKinney of Dallas was elected vice president and Walker Lichtenstein reappointed sec- retary. John Poole of this city is a member of the council. Many local bankers know Mr. Wetmore, as he addressed a regional savings conference here two years ago. - . Al DIRECTORS ARE NAMED. MARTINSBURG, W. Va, February 22 (Special) —Potomac Light & Power Co. stockholders yesterday at the annual meeting here elected the following di- rectors: P. E, Wilson, J. R. Poland, Dr. 8. N. Myers, W. R. Caskey, T. W. Mar~ tin, Allen R. Emmert, B. A. Poland, this city; E. L. Coblentz, Frederick, Md., account of absence of some of the di- rectors the organization meeting deferredy The | Back in 1922 the Federal Re- : Wmfi% | and M. F. Riley, Hagerstown, Md. On Special Dispatch to The Star. NEW YORK, February 22.—There is no immediate danger of adverse ef- fects upon trade from the diversion of funds into security market channels, according to the weight of opinion of authorities, summarized by Gage P. Wright, president of the Business Eco- nomic Digest, in the current issue of that publication. “The doubtful factors in the outlook for trade and industry continue to emanate principally from the credit situation,” Mr. Wright states. ‘More and more authorities refer to the out- look for business as being largely de- il B mcinitniosadaiers M o S ILDING SLUMP IN BU Special Dispatch to The Star. NEW YORK, February 22—When bankers speak of the effect that current high money rates are having on busi- ness they point to the effect of these rates on the building trade. This is the one line of industry that shows distinct signs of contraction, due to the diffi- culty of financing new construction, although probably a factor of equal importance is the overbuilding in dif- ferent parts of the United States in recent years. The figures of January building per- mits, just available, indicate a decrease | of 5 per cent, compared with last De- cember, and of 11 per cent from Janu- ary, 1928. This has been due chiefly to the slowing down in the smaller cities and towns, for in a number of the metropolitan centers, notably New York, Philadelphia and Detroit, the totals last month were larger than last year. In the case of the first two, they :gezr_rl: even greater than in January, ‘The heaviest loss in January occurred in Chicago, where the value of building permits was 50 per cent under that of the same month last year and 40 per cent under January, 1927. San Fran- cisco, Washington, D. C.; Newark, N. J. Cleveland, Ohio; Baltimore, Indian- apolis, Houston, Tex.: Boston, St. Louis, Loulsville and Buffalo all indicate a shrinkage; but the totals in Los Ange- les, Beattle, Portland, Oreg.; Atlanta, Ga.; Milwaukee, Cincinnati, Pittsburgh, Richmond and Hartford, Conn., were well above those of last year. ‘The general situation appears to be that while no strong downward tend- ency in building construction is indi- cated there has not been much change for the better since the effect of high money rates first began to appear last Summer and to put up barriers against the promotion of building projects, REPORTER BUYS SEAT ON STOCK EXCHANGE Special Dispatch to The Star. NEW YORK, February 22.—William Francis Heflernan, a reporter for the Consolidated Press, who has been en- gaged in Wall Street newspaper work naLy years, was revealed yesierday as the purchaser of a seat on the New York Stock Exchange. The price he will pay was not inaicated, but it wiil be not more than 3440,000. He has arranged to buy four ‘rignts,” each entithng the houder to a 2o per cent interest in a seat. ‘Lhe only transactions that have taken place in such “rights” were for 16 at $109,500 each, and ior 2 at §110,000 each. The nameés of the sellers were not disclosed. Other buyers who are acquiring “rights” granted to members unaer the recent decision to sell 275 additional seats are Moorehead C. Kennedy, jr., of Drexel & Co.; Enrico N. Stein of Annenberg, Stein & Co.; Percy A. Byron, Alexander B. Carver, Sylvan M. Barnet, Daniel Allen Lindley, Edward Roesler, jr.; Robert Johnston, jr., and Daniel M. McKeon. DOUBTS DANGER TO INDUSTRY _ IN STOCK MARKET ACTIVITIES pendent upon the result of the con- flict between business and money. Although none are willing to infer that credit is not being provided for com- mercial purposes in adequate amounts, the belief seems to be growing that business cannot and will not Pny in- definitely the present relatively high rates for money. Seurce of Market Credit. “On the other hand, many equally competent economists point out that business is doing about as much lending as borrowing, and further concern over, this phase of the situation is to a great extent unwarranted. About 75 per cent of the increase in so-called ‘broKers' loans’ last year resulted from funds advanced by individuals and cor- porations. These funds can be with- drawn when required, but the signifi- cant point, in the opinion of the ma- jority of observers, is that they were not withdrawn, nor did they show a decrease, even during the past five months of active business. Briefly, the weight of opinion indicates that busi~ ness has not, up to this time, been seri- ously affected by the steady growth in loans secured by stock and bond col- lateral, and that there is no immediate danger of adverse effects upon trade from the diversion of funds into se- curity market channels. “Among the common explanations as to why funds have not been with- drawn from the call loan market in recent months are: (1) The lack of commodity price inflation which has mad~ inventory accumulation unneces- sary; (2) the rapid turnover of stocks of goods, and (3) the higher efficiency of transportation facilities.” Securities Market Situation. Reviewing the situation, in the se- curity market, Mr. Wright states that authoritative opinion remains bullish on recommended issues, despite ‘the Federal Reserve statements on specula- tion and credit. “The attitude of the public towards the financial market is regarded by authorities as being one of watchful waiting,” Mr. Wright states. “Holders of stocks show no in- clination to sacrifice them during riods of falling prices, but neither 2s activity nor bullish enthusiasm been pronounced on days of recovery.” ‘While but “few economists are op- timistic enough to look for an im- mediate and pronounced revival of strength in stock prices generally until some part of the fear over the credi situation is dissipated,” there is still “confidence of leading authorities in the long pull trend of prices,” Mr. Wright says, although “it s probably true that a good many of the rank and file of speculators have recently withdrawn from the market.” Buck & Company Estaviianed 1916 Stocks Bonds Grain Cotton Write or call for weekly market letter No'obligations BUCK AND COMPANY Evans Bldg. 1420 New York Ave. Franklin 7300 Money to Loan Secured by first deed of trust on real estate. 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