Evening Star Newspaper, June 30, 1929, Page 74

FIN ANCIAL.” PUBLIC MORE CAUTIOUS IN STOCK MARKET DEALS Break of Last Sprin g Shakes Confidence of Traders—Attitude of Investors £ % g 1) sl "7 BY GEORGE T. HUGHES. Special Dispatch to The Ster. NEW YORK, June 29.—Whatever the story told by the averages and whatever deduction may be drawn therefrom as to the future, one thing is certain about the stock market today and that is that the public attitude toward it has undei- gonec a great change since January 1 last. Caution has replaced confidence. Apprehension has taken the place of assurance. All this may be changed if the re- covery of the last two weeks of June is sustained. That is & matter for the future, as to which no opinion is ex- pressed here. The rally has been the result, for the most part, of operations and it is doubtful whether the great outside public realizes how much progress has been made. Mean- while, it is still true that in the popular mind the feature of the first half year in the stock market is the break in May rather than the recovery in June. ‘The emphasis is no longer, publicly o1 privately, on huge winnings in the spec ulative field. Stories of this or that big operator who made a “killing” in the bull market are seldom heard. Instead, it i whispered in Wall Street that so and so was “badly hurt” in one or the other of the market breaks during the past six months. On the outside the ama- teur is not bragging so much about his perspicacity as to matters financial. He does not ‘alk about his losses, because | that is not human nature, but his friends are not so reticent. The story that gets the big “pl the newspapers is not the spectacular | advance in prices. break which now gets all the attention. Instead of figuring out how much Mr. Rockerbilt has made by the rise in the quotation for the stocks with which his name is connected, the computers are busy fixing the amount that has been cut off from “values” by the deflation in one or more specific issues. Faulty Estimates Made. A good deal of the basis for these es- timates is nonsense. To take, for in- stance, the difference between the high price of General Motors this year and its low price and to multiply that dif- ference by the number of shares out- standing and then to say that the re- sult is the amount by which the value of General Motors has been diminished is absurd. In the first place no consid- erable proportion of ‘the stock could have been sold at the high price, nor could any large amount have been bought at the low. It is only the float- ing supply which has made material for fhe manipulators. Investment holdings have been for the most part undis- tarbed. Then, too, if there has been any change in the value of General Motors it has been on the side of advance, whatever may have happened to the market price. Current estimates of that value have changed, but that is all. Nevertheless, it may be admitted that there have been huge losses sustained and not all of them on paper either. The question then arises as to how it all came about. The answer that is most widely accepted in Wall Street, using “Wall Street” to mean the “active trading element and its outside follow- ers, is that the Federal Reserve Board to blame. qubuhly the majority who hold this view have only the vaguest notions as to just what are the functions of the Federal Reserve Board and just how s Teieral Reserve system operates, sux they are none the less fixed in their opl The Federal Reserve Board is pictured as a huge ogre eager to devour innocent and hapless speculators. Reserve Board’s First “Warning.” This general statement is subject to the qualification that the odium at- tached to the Reserve Board in the mind of the speculator has been transferred during the month to that of the directors of certain of the Reserve banks, who wanted to raise the redis- count rate and who were prevented from so doing by the central body at Wash- ington. But that is a minor distinc- tion. In any case it is the banker who is held to be at fault. Suppose we review briefly the facts. The first definite move was made in February when the Federal Reserve Board gave out a “warning” that if the stock market continued to absorb credit as it was then doing business would be injured and it would be neces- sary for the banking authorities to take restrictive action. Strong indorsement was given to this view by various emi- nent economists and practical bankers, among them Paul M. Warburg. In May the Federal Advisory Council made public _its recommendations to the Re- serve Board that permission be given to such reserve banks that asked 101’[ it to raise their discount rates, again | stressing the danger to business of the speculative mania. Incidentally, it was | allowed to become known that the re-| serve banks of New York and Chicago had made this request and that the| board at Washington had denied it. Now one does not have to be an ex- pert in banking or economics to get the idea that there was powerful opposition 1o a further advance in prices for stocks. It was enough to shake the nerves of the most daring trader, but that was not all. These official statements were supplemented and accompanied by news of secret Reserve Board sessions, as to the proceedings of which nothing was ever officially made public. Uncertainty Irks Wall Street. The policy seemed to have been well thought out and consistent. The first Federal Reserve warning, which was given on February 7, was preceded by notice on February 6 that an impor- tant announcement was coming. The market, weakened on the first day and broke violently on the second. Before there had been time thoroughly to digest this February warning, notice was given of a special meeting on Feb- Tuary 11 of the board of the New York Reserve Bank. Nothing was ever given out as to what happened at this spe- cial meeting. The regular meeting on February 14 was prolonged until f:5¢ p.m., whereas it generally is over two hours earlier, indicating to Wall Street that serious matters were discussed— but again the outsider never lcarned what those matters were. He could only surmise, and from a market stand- point, that kind of uncertainty is worse than the facts would have been, no matter how unfavorable. More or less the same thing went on during March. Washington dispatches would tell of meetings of the Reserve Board generally attended by important Tepresentatives of the various Reserve banks without, however, any detail .as to what was being done. It was the same way with the problem of the dis- count rate. to whether or not the rate should be raised wes more wearing on Wall Street’s temper than the change, if actually made, would have been. 1t gradually developed that there was a difference of opinion in the Federal Reserve Board itself as to what action should be taken. The members were a unit presumably in desiring speculation restrained and the stock market liqui- dated, but they were not agreed as to the means for bringing that about. Meanwhile money rates kept on ad- vancing. The extreme high for call loans was 20 per cent, which was touched only once, on March 26, but the general average of rates was higher than at any tim2 since 1920. These high charges for demand funds were secompanied by a Tise in time money, also to the highest in nin2 years, and by a hardening in rates for business T, "X: to the merits of this tight money Federal Reserve authori- was bitter controversy. " agreement. 3 E rofessional | It is the violent | 0 | Continuous_discussion as | . Is Now Apprehensive. Nevertheless there are some generaliza- tions which it seems saie to make: (1) Speculation was carried on in record-breaking volume. It absorbed to itself credit in record-breaking amounts. Fundamentally this was the cause of the credit_stringency. (2) The money stringency was accen- tuated by the deliberate policy of the | Federal Reserve banks. They withdrew credit from the market directly by sale of Government securities and of bills, and they did it indirectly by bringing pressure to bear on the member banks. (3) The extremely high rates for money had the effect of bringing in as lenders corporations and individuals never before prominent in that fleld. Eventually more than 50 per cent of brokers' loans came from this source. (4) It was always within the power of the Federal Reserve banks to have eased the credit strain if they had seen fit so to do. Analysis of any weekly rlnndlllun statement will demonstrate this, (5) The justification for this course on the part of the Federal reserve was first that speculation had reached a dangerous stage and second that the amount of credit absorbed by the stock market, with the consequent high rates for money would, if it had not already done so, adversely affect trade. Statistical Data Lacking. For the most part the foregoing points need little elucidation. Some- thing may be said, however, about the | argument_ advanced in the fifth para-| graph. Whether or not speculation had | reached the danger stage is a matter of opinion. From the very nature of the case, statistical data are lacking. It may also be questioned whether specu- lation per se is a_proper subject for consideration by the Federal Reserve authorities. It falls within their prov- ince only when and if its influence ex- tends to general trade. Now as to the injury done to business either by speculation or by the high money rates that speculation brought little evidence was advanced. The only really important unfavorable develop- ment during the six months just closed was the collapse of wheat and the break in farm prices generally. For this neither speculation in stocks nor higher charges for money can be blamed. Cer- tainly there was no indication of injurl~ ous reaction on business of the steel, the automobile or the distributive trades. However that may be, the Federal Reserve policy had the desired effect. ‘The rise in stocks stopped and the market repeatedly sustained violent breaks. The most spectacular one was on March 26, when call money at one time was officially quoted at 20 per cent, while in the outside market loans were said to have been effective any- where from 22 to 25 per cent. On this day alone 517 stocks made new low prices for the year up to that time. A Historical Event. Collapse was averted and the mar- ket was turned about an hour before the close when the National City Bank came into the money market and offer- ed funds in quantity sufficient to meet the need. Perhaps never before in the history of the Stock Exchange has there been such a sudden rally as took place between 2 and 3 p.m. on this March day. Observe that it was not 50 much the high rate for money that broke the market as it was the fear that money would not be obtainable at any price. For his course in this crisis the head of the National City Bank was severely criticized in some quarters, but that he did a public serv- ice is now quite generally agreed. Second only to the March break was that of May 22, the day after the statement of the Federal Reserve Ad- visory Council in favor of higher dis- count rates was made public. On this occasion more than 200 stocks went to new 1929 lows. There was another bad break a week later in sympathy with the drop in wheat under one dol- lar a bushel for the first time since the World War. . After the deflation in May, the mar- ket encountered a period of dullness with activity falling to the lowest levels of the year. The only feature was the | | renewed upbidding of the utility stocks, where imagination was stirred by the formation of investment companies de- signed either to acquire control or to buy substantial minority interest in the principal holding and operating corpor- ations. Speculation in this part of the list was an unrestrained and extrava- gant as it had been elsewhere earlier in the year. Earnings per share were capitalized on an unprecedented scale. The leading stocks in this group sold at times for 20 and 30 times earnings per share and sometimes even more. Conservative Element Wary, Theoretically, this . speculation was based on the steady increases in earn- ings the electric light and power com- panies report, the apparently limitless demand for their services and the ex- perienced and intelligent managements in control. And yet the rapid rise in prices for these Stocks did not com- mend itsell to the conservative ele- ment in the Street, nor, for that mat- | ter, to the executives of the corpora- tions themselves. If the market esti- mate of the value of these shares ls correct, reduction in rates charged to customers is surely indicated and pub- | lic service commissions are not likely to | overlook the point. Then, as President | Mathew Sloan of the New York Edison | Co.” pointed out at the convention of | the National Electric Light Association, | the electric light and power industry is facing the dual problem of declining sales per dollar of investment and ris- | ing_investment per kilowatt hour. Space does not permit a detailed re- | view of the status of other groups of stocks. In general, it may be said that ) the market was not indiscriminate in | selecting its speculative media. The | indictment is not that the shares which |led the advance represented trades in | an unfavorable position, but that_the | rise was carried further than anything !in the present situation justified or | anything likely to develop in the futnre | warranted. Whether or not this is a | true bill is again a matter of opinion. The claim has been repeatedly made | that common stocks should, and will, | hercafter seil on a lower vield basi$ | than on a higher price earnings ratio | than they did before the war, when the | United States was a debtor Natlon § stead of a creditor, as it is today. Al- lowance must also be made for the mod- | ern popularity of the equity investment j over the fixed charge security. AGREEMENT ON NITRATES STIRS U. S. CONFERENCE { Special Dispatch to The Star | NEW YORK, June 29.—The recent report of an international agreement | having been reached by German, Britich jand Chilean producers to maintain the present_relationship of prices of syn- thetic, by-product and natural nitrates has added considerably to the interest of American chemical and fertilizer manufacturers in the conference of American commercial attaches stationed in Europe, which will be held in Paris, July 29 to August 3. ‘Whether American buyers of nitrate, the most important of which are the fertilizer manufacturers and the farm- ers, should immediately protest the re- ported agreement or adopt a policy of “watchful waiting,” with the hope that beneficial stabilization will resuit, is a query raised by Charles J. Brand. ex- ecutive secretary of the National Ferti- lizer Assoclation, Washington, who sailed from New York today to address the conference. American producers of nitrogen are understood by Mr. Brand not to be parties in any way to the reported THE SUNDAY STAR, WASHINGTON, D. C, JUNE 30, 1929—PART 5. oo RECORD FISCAL YEAR IN TRADE BY J. C. ROYLE. Special Dispatch to The Star. NEW YORK, June 29—Sustained speed under thorough control. That was the distinguishing mark of the business year of 1928-20. It seemed hardly possible that the tremendous progress of 1926 and 1927 could be ex- celled. It was not excelled, it was over- whelmed. Prosperity was general throughout much of the world. Production attained the highest levels ever known in the’ history of the world. Distribution was more evenly spread than ever before in this country. The one real depressing note was sounded by the agriculturists. ‘They wound up the fiscal period with prices for grains well below those for June, 1928, with a feeling of unsettle- ment in agricultural circles caused somewhat by congressional debate and partly by lowered financial position. Business laughed at scasons during the fiscal year and especially in the last six months. But it did not laugh at the weather. The weather was a factor, but seasons were not. The usual seasonal declines, kow-towed to for gen- erations, did not make their appearance. Industrial activity simply would not se at the time it was expected to show a marked decline. This over- turned the theories of years. In those industries ‘Where the weather had a bearing the unfavorable periods were compensated for by subsequent weeks of favorable weather, No Feet on the Desk. This year was not one in which any producer, manufacturer or merchan- diser could sit back, put his fect on the desk and take orders. He had to bat- tle for every bit of business. This pro- moted efficiency to a point never reached before and was of material benefit to the buying public and the ultimate consumers. New methods were introduced, new affiliations were formed and new industries were promoted with :he‘ by-products of the old lines as a asis. Price levels in the main were lower than jn the previous year for some very imporftant commodities, but while profit margins were narrow, volume of busi- ness in general showed a striking gain, especially in the six months from Janu- ary 1 to date. Immune to Politics. The political campaign of 1928 was one of the most bitterly contested in many years, yet this factor did not suf- fice to check prosperity or business progress before November and the an- nouncement of the election result was followed by a spurt which carried Christmas trade to a height never be- fore experienced, even in the boom ex- rpansion years of 1919 and 1920. This immunity to political mov ments did not last long after the spe- clal session of Congress was convened in April. The uncertainty of action on farm relief which continued past the middle of June was a depressing factor. The debenture feature was a bone of contention until the test vote in the House June 13 with vehement advocates who sald it was essential and equally vehement opponents who declared it ‘was nothing but a dole such as was pald to English unemployed in another guise. A further: depressing influence re- sulted from the feeling in many qua: ters that even after the bill became a law considerable time must elapse be- fore its provisions could be put into ef- fect and the measure have a chance to show what good it could accomplish. Finally the uncertainty called to the mind of the farmer very emphatically the fact that he needed relief. A good many farmers wound up the 1928 crop year feeling they were in a sound posi- tion, but after the debates in Congress they began to doubt it. Then, too, the tariff changes proposed were an un- settling factor. ‘The changes, whatever they may be, will be of benefit to many industries, but there will be some busi- ness men hurt for those who are helped. Industry Upholds Prosperity. In the previous fiscal year business owed much to the improved condition of the farmer. This year it owed an incalculable debt to the prosperity of the industrial worker. In the last half of 1928 the farmer was feeling his oats when he ought to have been selling his wheat. Today many farmers have huge holdings of wheat and the price is down around 40 cents a bushel for No. 2 hard as compared with a year ago. The farm situation has been aided by improved methods, by cost account- ing, by rotation of crops and by dif- ferentiation of products, and today the farmer is in anything but a desperate situation, as is shown by the increase in the value of farm lands. Most of his troubles are psychological, but they trouble him none the less for that. The industrial worker, on the other hand, has had almost continuous em- ployment at extremely high wages. Wage levels in the last year have risen if anything. The industrialist has had money to spend and has spent it. He is today the most valued customer of the firms he works for. He has been aided, not hurt, by the new and im- proved machinery and methods which have put over three horsepower at the beck and call of nearly every industrial worker. This machinery has not shoved men out of employment. It has led corporations to develop new lines and thereby create new jobs. There is still the problem of the man past 45 to reckon with. Many thousands of middle aged men are out of work and can secure none, Efficiency Development Marked. Efficiency has grown tremencously not only among the trained workers, but among the untrained men and women. Much has been accomplished by added efficiency in management, but in most cases the workers themselves have raised the standard and made their fellows maintain it or at least keep a pace commensurate with the ability of each. This has been found to be a money-maker among the workers. labor troubles during the fiscal year. ‘The major one was the strike of the textile workers in the cotton and rayon mills of the South. This was of con- since Northern mill owners had moved South in the hope and expectation o avoiding just such a_situation. business already quivering with an- ticipation of blows from the commercial bludgeon. A dollar today will buy more than it ‘would a year ago- of a majority of commodities except labor. have gone into investments of various sorts and it cannot be denied that a huge number of them have gone into stock speculation. Speculation and Business. 1t is surc that this volume of specula- tion has had a minor effect on business. | The first effcct was psychological, but the more potent results came from the tightening of money and the restrictions of credit due to stock market activities and the efforts of the Federal Reserve Board to check them. No legitimate in- dustry, however, actually suffered from lack of credit for judicious purposes prohibitive levels., New security issues were absorbed during the 12 months at the rate of $7,820.000,000 a year. This compares with about $7,720,000,000 in the previous year. Then, however, the majority of such offerings consisted of bonds, while this year they have been stocks, and most “of them common stock issues as . This represented an entirely new trend in the styles of investment. While more money was in investments, a trifle less wi tion, the loss being The citizens | of the country have plenty of dollars, | t00. The gain has not been registered | worry automobile manufacturers, They very vigorously in savings accounts, al- | though they have gained. Many dollars | and the interest rates did not rise to| { reporting heavy gains. about $130,000,000. The amount in cir- culation per capita fell about $1.08. So far as the industrial lines were concerned, there was scarcely an indus- try which did not show improvement, especially within the last six months. ‘This gain was not evenly distributed by any means. There are still lines of en- deavor which are in anything but a saatisfactory condition, but outside the agricultural field most of them made some gain. It is notable that the great- est gains were made by the largest and most prosperous concerns. This was be- cause such companies were able to cut costs to the bone and thus widen mar- gins of profit, for net income came from savings in production and distribution rather than from high prices. It was another year of consolidations and mer- gers, with executives striving to cut costs and keep pace with new methods of manufacture, distribution and selling, Nearly every line showed indications of this trend and the public seems to have lost its terror of corporations merely be- cause they are big, as the list of bil- lion-dollar concerns continues to grow. The Business Barometers, The state of business is perhaps most accurately measured by the activities of the key industries, such as steel, auto- mobile” manufacture and agricultural implement production, and by the con- sumption of electric power and gas and the density of railroad freight traffic. Each one of those lines established a record for all time during the last fiscal year, and, what is more important, each is doing better at the end of the | pericd than at its beginning. At mno time did they show a decided sag, even during the periods when a let-down is | usually anticipated. ‘The gain in the production and sale of electric power has been tremendous. Today there are 19,000,000 homes wired for electricity. The day of the individ- ual plant with a production capacity of a million kilowatt hours is fast ap- proaching. In the last year the country used approximately 95,000,000,000 kilo- watt hours, a gain of about 12 per cent, and before the end .of this calendar year the rate is expected to exceed one hundred billion annually. This power has been produced in coal- burning plants at the rate of 1.76 tons of coal per kilowatt hour, and in some plants the cost has approximated $1 per kilowatt hour. The improvement in methods has been revolutionary, and equipment new five years ago is obsolete today. Consumption of gas, manufactured and natural, reached a total of around 2,260,000,000,000 cubic feet. About 4,- 000,000 homes now use natural gas, and manufactured gas accounted for over 500,000,000,000 cubic feet of total sales. Chanting Wheels of the Mills. The chanting wheels of the steel mills have sung their song for the last six months at a pitch never before equaled. Nearly all steel milis were at or close to capacity continuously. The rate for the industry over much of the time was 95 to 98 per cent, the fall below 100 being due to shutdowns of units for necessary repairs. Seasonal slackening was conspicuous by its absence. Prices in general were steady and firm but notexcessively high. Competition was severe, but demand was continuous, with customers urging prompt de- liveries much of the time. ‘The steel industry is on & more effi- | clent footing as to men, machines and | sales methods than ever before. Pig iron producton averaged around 3,500,- 000 tons a month for the last six| months or better, while steel ingot ran between 180,000 and 190,000 tons a month. The slackness in oil country 0ods was made up for by gas pipe ines orders and by increases in tin plate and other lines. Agricultural Implements. Agricultural implement manufactur- ers had a fine six months from July 1 to December 31, 1928, but with the be- ginning of the new calendar year, the effect of the agricultural depression be- gan to be felt. This cut domestic sales to some extent, but orders already in | were sufficient to keep the manufactur- ing plants going at top speed until the foreign trade picked up and carried the business along. Profits for the larger companies were 20 per cent higher this Spring than a year previous. The railroads received a decided benefit from the Supreme Court de- cision in the O'Fallon case, which will require & new valuation by the Inter- state Commerce Commission and delay for long the recapture of any excess earnings over 6 per cent on the new valuation by the Government. In only a few weeks during the fiscal year did freight car loadings fall below the mil- lion mark. For the 12 months the loadings eclipsed previous records. The class 1 railroads raised their earnings to nearly $95,000,000 a month as the fiscal year drew to a close, Which represented above 6 per cent on the old valuation as compared with a trifle more than 4 a year ago. Moreover passenger traffic, “long on the down grade, has turned upward and a splen- did vacation travel is anticipated. Mergers Seem Essential. It is unlikely the roads can encompass many more economies. In fact, operat- ing costs for the next six months are likely to be higher and to maintain the gain cited above, mergers seem abso- lutely essential. Pressure will be brought to bear on the Interstate Commerce Commission to further such consolida- tions as are warranted. Bullding activities seem likely to touch or exceed the $7,000,000,000 mark again in 1929, The volume of work dropped slowly last Fall and the minute that Winter weather ceased it shot up- ward again this Spring. The mainstay | of the building construction industry | enjoyed excellent, sales. in the fiscal year has been public utility plant construction, public improvemests and office and factory building. The volume of residence and apartment house construction has been fair, but There were comparatively few serious | only fair. The huge, towering office structures are what have set the building year apart from others. These have sprung up in cities of all sizes, even those siderable moment to the textile trade, | where ground values did not necessitate them. The road building and street paving programs have been more ex- ‘The | tensive than ever before and have en- strike therefore created uneasiness in a | gaged services of hundreds of thou- sands of men, necessitated huge ex- penditures for machinery and supplied and_aided the automobile business to reach its present heights. All Auto Records Surpassed. The saturation point has ceased to know now that so long as there are roads to move cars on the industry will sell automobiles. Which companies will sell the most cars is a question, but they will be sold. Output for the first six months of this calendar year totaled approximately 3.350,000 cars and trucks for the United States and Canada. This was a high gain and it now looks as if the year's production for 1929 will be between 5,500,000 and 6,000,000 units. Last year was General Motors' year. ‘This year also is a fine season for that company, but it does not stand alone on the peak. Ford has finally gotten into full production and is capturing a full share of the business in the low priced fleld. Others in th's fleld are Some concerns are not doing well and mergers are in the wind, but in general the industry is in great shape. Further competition impends, A British maker threatens to invade the market and a big mall order house is considering entering the field with an asscmbled car made to gell under its own trade name. parts and accessory manufacturers have had a wonderful season, with extraor- dinary volume of business and increased profits. ‘This buying has been for re- placement as well as for original equip- ment. Much of the time the main producers have had to run at capacity and customers were clamoring for de- liveries. Production in the last six months has been more than 30 per cent ahead of that of the correspond- ing months of 1928. Tire output in the last half year has been at a higher rate and more produc- tive of profit than any similar period for years. For the first time in some years the crude rubber price situation is favorable to the majority of manufac- been high, and replacement demand has kept dealers’ stocks low. The tire con- cerns are rushing construction of big new cord and fabric mills in the South. Production has been running between 5,000,000 and 5,600,000 casings a month for the last six months. High Earnings Recorded. Big power developments requiring cen- val station equipment, plans by rail- roads for electrification programs and radio refrigeration, automobile and tele- phone and telegraph company demand, have united to make the electrical equip- ment industry highly profitable for the last year. Sales volume has increased, and this has been sufficient to counter- balance narrowing profit margins. Buying of railroad equipment has bucked,up since the first of the year, and orders placed for locomotives, ca and signal equipment have shown a d cided increase as compared with 1928. Orders were approximately three times as large in the last six months as in the corresponding period of last year, and for the 1929 year some estimates place the increase at 50 per cent, The Jumber industry seems to have done the best among the building ma- terials. Many of the strong companies will show higher profits than a year ago, and the position of the industry itself is sound and stable, with demand fairly constant and high. The cement indus- try is overmilled and competition is severe, with prices at a point where profit margins are narrow and stocks slightly larger than a year ago. The de- mand must grow up to its plants before this condition is remedied. The plumb- ing, steamfitting and hardwere lines ll’)l:;/; maintained or bettered their 1928 Country Now Air-minded. Aviation has intrigued the minds of the American people, and the industry is growing by leaps and bounds. In fact, it is doubtful if it is not growing too fast; that is, whether production, is not outstripping sales volume and potentiali- ties. There are nearly a half hundred airplane manufacturers in the country, and plants are being started or expand- ed_continually. In the last six months over 4,000 planes have been turned out and about three times as many engines, Competi- tion is severe, and there has been some cutting of prices. Mergers are forecast as a means of eliminating unprofitable production units. But the flying schools are crowded, the commercial lines are gaining in number and business and the future of the industry looks extremely bright. There are now 28 big commer- cial air lines operating freight, express, passenger and mail service in this coun- try, and routes, both domestic and in- ternational, are being rapidly develo) | Huge sums are being spent on nymé fields and field equipment, Prompt Communication Speeded. Expansion of telegraphic, telephone, radio and cable communication in con- | junction with the air mail has speeded up the entire business pace in the last year. Some of the various concerns have joined hands. The telephone com- pany profits have shown a gain of fully 10 per cent in the fiscal year, reflecting increase in customers "and operating economies. There are nearly 20,000,000 phones now installed in this country. The volume of telegraph and cable and radio business is increasing steadily but operating costs have pre- vented all the gain from being turned into profit. Lower cable rates did much to_stimulate business. The average cash street car fare is about 8!4 cents but this Nas not put all the ‘concerns by any means on a satisfactory footing. Traffic is not gaining on those lines which have not kept up-to-date and the parking and traffic congestion situation has held the tracticns’ advance to a slow pace. The electric lines now have adopted the bus instead of fighting it and are giving A combined service, as some of the rallroads also are doing. More Tuning In. Radio has come back strong. The new equipment made available in the last 12 months has caught the fancy of the public. This is specially true of the electrically operated sets and the dynamic speakers. There are now approximately 12,000,000 scts in opera- tion and while many new customers are being attracted, the people with sets already are the backbone of the trade. The industry hopes- sales will appro: mate a billion dollars in 1929, and the pace so far assures the cclipse of all standing records. The factories have been at capacity and scarcely could keep pace with demand. The tube producers have never had such a call for their products. Television has not yet become a commercial factor. ‘With their plants working at capacity much of the time, the industrial con- cerns have been huge buyers of ma- chinery and machine tools. So great has been the demand and so heavy the pressure for deliveries that second-hand tools which could be delivered promptly ‘The profits of some of the companies have been half again as great in the last six months as in the corresponding months of 1923. Following Not Forging Styles. At times during recent months ap- parel sales have been slowed in som sections by weather and financial con- ditions, but in general these recessions have been compensated for when condi- tions battered. Profit margins for some improvement is that the producers and distributcrs have tried to give the public what it wanted instead of trying to make the public want what they produced. The results have been apparent in 4 underwear, outerwear, bathing riety of fabr Stocks of apparel are lower than a year ago. Raw material prices are & litlle lower and profit mar- gins a little wider. The advance demand {A'vrx Fall goods is satisfactory in the main. ‘The fabric manufacturers are not in a particularly enviable position, but the great majority of makers showed im- proved carnings in the fiscal year. The cotton, woolen and silk industries all are overmilled and consolidations and scrap- ping of uneconomical plants are pro- ceeding but slowly. However, for the first five months of 1929 production of cotton goods was 1,558,921,000 yards and shipments amounted to 1,583,324.000. Sales totaled 1,406,975,000 yards, or 96 per cent of production. Stocks de- creased in the five months 6.2 per cent and unfilled orders 184. Unfilled or- ders, hand. ‘Wool Prices Low. The woolen industry is on the up- grade now after a doleful period in 1928. Business 1s heavier than a year ago, but mills have been sble to work at only about 70 per cent of capacity. Wool prices are considerably lower than a year ago, but the growers, many of them ‘The automobile industry has been the best _customer that the r: and fin- ished material producers have had in the last 12 months, The automobile have made a profit. The important fact is that the trend now is toward better- " e ment. 1 turers. Original equipment demand has | firms have been better but the main iamas, shirts, collars and a va- | however, still exceed stocks on | First Two Quarters of 1929 Carry Forward Tremendous Gains|p.owest Do Scored During Latter Half of 1928—Prosperity_ General. money than in the previous fiscal year. Buying was heavy and while imports increased. the demand took care of the added volume offered. The industry is expanding its plants, but production was ‘hampe; to some extend by the textile strikes in the South. ‘The silk trade has found an excellent demand for printed silks. Raw silk prices have fallen to low levels. The danger from overproduction still is hanging over the industry, however. Shoe sales have, been fair and makers have benefited from the low prices for hides and leathers. The latter are now apparently in a strong position, but tan- ners have had a disappointing year, It is estimated that about 170,000,000 pairs of shoes were produced in the last six months. Food Products Situation. ‘The food producers have had a mixed year. The canners and preservers have done well and so have fruit and vege- table growers in sections. Others have found their profits seriously curtailed. Stocks in general, however, are not heavy. The baking companies have benefited by the low cost of wheat, which has been reflected in flour and made higher profits. Soft drinks, candy, chewing gum and similar products did a decidedly larger business than in the previous year and benefited from low prices. iry products, esFeclllly ice cream, provided an outlet for farm products, which was a big boon to the agricul- {ural districts. Consumption of dairy products is expanding steadily and 50 are distributing companies. ~ Mergers have taken place in many of these. The meat packers had in the main a satisfactory year, although high prices curtailed the demand for beef o some extent. At present the hog corn ratio is in favor of the feeder. Live stock breeders have done well and through most of the year have been favored by high prices for animals. Sheep continued profitable despite ex- panding production. Production increased faster than consumption of sugar and the industry did not have a favorable year, as prices were at extremely low levels. Some of the refiners did well, however, and so did producers in the island pos- sessions. Chemicals in Good Demand. With industry at a high pitch of activity, demand for industrial chem- icals was strong. This was apparent especially in industrial alcohol, the insecticides and in the chemicals used in mechanical refrigeration. The paint companies did a huge business, aided by building activity, automobile pro- duction and the development of new products. The fertilizer concerns were affected adversely to some extent by weather conditions in the South and depression in the West. ‘The non-ferrous metals had a good year. It was a banner period for the copper companies, for the red metal advanced to about 24 cents a pound, and while it has dropped back some- what, it still is at a figure which as- sures generous profits to producers and refiners. ‘The records for production for all time were broken in the fiscal year "and profits of most companies were extraordinarily high even for the high-cost producers. Activity of the mines was general and employment at a high rate, both as to numbers and wages. lg.eld and zinc both acted well, but not so sensationally as copper. The production of each was high, but earn- ings of mine operators impioved. The Fuel Situation. The coal companies have improved their situation somewhat, owing to lower scales of wages and active industrial demand. The anthracite producers did better than the bituminous coal prop- erties, and the latter still have a long way to go to get a satisfactory basis, although they did better than in the previous year. The anthracite industry is spending millions for new and up-to- date equipment, and the bituminous coal men seemingly will have to do likewise. ‘The potential production of oil is hanging over that industry like a dark cloud, but demand has improved to such an extent that oil company profits have been at a far better figure than a year ago. Stocks are lower, prices are firmer and the outlook seems to be brightening. ‘The paper industry was aided by the establishment, of news print prices, but the industry, like some others, is over- milled and even curtailment of Cana- dian plants to 80 per cent under agree- ment is expected to raise profit margins but little. Cigarette sales are maintaining a steady growth, being about 10 per cent higher than for the last fiscal year., The industry, however, is in the throes of a competitive war between the tobacco chain stores and the grocery chains. ‘The wholesale price has remained Profits of the manufacturing concerns have increased. The trend in cigar con- sumption also has been upward, espe- cially for the moderate-priced machine- made cigars. ‘The moves in the cigarette war illus- trate the changes taking place in the retail sales field. Retail trade, with the greatest holiday season on record to its credit, has been at tremendously high levels. Buying power has been high and prices reasonable, with few sharp advences. Profits have been exceed- ingly good, but to make them good the merchants today are combining in their buying and going into new and untried side lines. For example, the cigar stores in some instances are moving into the restaurant, drug store, toilet goods and other fields, while tobacco manufactur- ers are venturing into the food distribu-~ tion area. The greatest gains have been made by the chain stores and by mail order ! houses which have opened retail stores, and the department stores are forming similar chains. Gains by the mail order houses have risen as high as 35 per cent | in some months above the 1928 level for the corresponding period. High Money and Bank Mergers. Bank consolidations of both big and small proportions formed the real fea- ture of the banking year. These mergers took place in all sections of the country jand were necessary in order to handle «the tremendous natural and orderly ex- Ipanslon in American industry and trade, as well as to handle new lines ‘of banking business. The banks went ! extensively into the trust and invest- ment banking fields and broadened | their activities materially from the old- time commercial banking lines. {,, Another feature of the situation was ithe advance in money rates due to the activity of the call money market and the volume of trading in the speculative markets and the efforts of the Federal Reserve Board to curb the volume of brokers’ loans. These factors had a psychological rather than an actual ef- fect, although money rates tightened. It was always possible, however, to se- cure funds for legitimate industrial and commercial purposes without paying extremely high for the accommodation. Real Estate and Insurance. Real estate was active during the year, but at prices which showed no ex- treme fluctuations. There was a splen- did demand for business and factory sites and the flying fields are making a marked change in real estate values and developments in the neighborhoods involved. Suburban property, especially near the big cities, was in excellent de- mand at generally higher prices and re- sort property found ready purchasers. Rentals were well maintained in most sections. ‘The life insurance companies had the \largest year they have ever had, ac- to some executives. The main- stay of the business was the group in- surance sales, Fire, marine and other steady since the cut in the Snrtn&] FINANCIK L.7- BOND PRICES SAG AS MONEY RATES REACH HIGH LEVELS mestic Group Mark Since 1926 Is Reached—June Sees Climax to Tumbling Values. BY CHARLES F. SPEARE, Special Dispatch to The Star. NEW YORK, June 29.—The climax of the six-month bond market period just ended was reached in the early part of June, when the United States Government, was compzlled to borrow on nine-month paper at 3! per cent. In March the government had sold certificates of indebtedness at 473 per cent, and a year ago at 37 per cent and 4 per cent. In November, 1927, it was able to obtain funds at 313 per cent. This represents the progressive strain on the money market while speculation in stocks was absorbing sup- plies of capital and the public was showing a strong preference for stocks rather than for bonds. Within the half year:domestic bonds touched the lowest average since 1926, With the exception of a brief rally in April there was an almost continuous decline from the early part of January to the end of May. It occurred, how- ever, on a comparatively small volume of transactions, for the heavy liquida- tion by institutions and by individuals took place in the Summer of 1928 and again during the Autumn of that year. ‘The situation can best be pictured by giving some of the important changes in _different groups of securities. Between their high prices and their low level United States Liberty bonds showed a range of from 2% to 2 points. United States Treasury certifl. cates declined from 3Y; points to 63; points. The railroad legal list of bonds had an average drop of about 5 points. The legal public utilities fell from 4 to 5 points. In the secondary railroad mortgages there were declines of from 5 to 10 points. Unlisted public utilities went down from 4 to 7 points, and in some cases to 9 and 10 points. There were many industrial bonds in which the losses were extreme, but these re- flected unfavorable internal conditions ::::lkcrt than the state of the credit et. Foreigns Show Decline. Turning to foreign bonds, in which the average decline was also substantial, we find evidence of an oversupply of second and third grade credits and co: ditions suggesting lack of discrimina- tion both as to the amount of such bonds offered to the American market in 1927 and 1928 and also the quality Tl % inay indicated in losses of from 5 to 7 points in the bonds of Antioquia, of 7 to 12 points in those of Bolivia, of 4 to 6 points in Brazilian issues and 3 to 5 points in the obligations of Chile and Peru. The various government and bank bonds of Columbia dropped 9 to 12 points and those of the Dominican Re- Ppublic from 8 to 9 points. A number of the South and Central American coun- tries and provinces borrowed beyond their capacity. They are now experi- encing difficulty in meeting the service of their dekts. They are not altogether at fault for this condition. When the going was good and the American public ‘was wll“nglw buy high coupon foreis bonds without looking much to the equities behind them, they were sup- plied, as they always are, and today find that they are holding some rather poor e Goming to the ming German of bonds, which had to bear themt of the liquidation during a critical period of the debt negotiations in Paris, we find the following conditions between Jan- uary and the first of June: Municipal and provincial issues off 6 to 8 points, mortgage bank bonds down from 6 to 9 points, public utilities from 6 to 10 points and industrials off 5 to 7 points. The German government 7 per cent loan stood up splendidly during the period of liquidation and varied in price less than a point while others were experi- encing a severe decline. Movements that were sympathetic with the Eu- ropean financial and political conditions — forms of insurance also di = “n';‘;o"g“:";esg d a big vol. e tous ade has grown to such proportions as to be a major factor in the cash receipts of foreign countries and domestic areas. It is estimated that traveling Americans spent a billion and a_half dollars on their trips in the last 12 months. This has aided the ship- ping industry to some extent, but the passing of some of the Government- operated lines into private hands was a factor which had a distinctly improv- ing effect on the merchant marine sit- uation. Shipyards also are more active than a year ago. The volume of business and the profits from intercoastal, coast- wise and interior waterways transporta- tion was excellent. ‘The volume of sports equipment sold has never been exceeded before and at- tendance at amusements throughout the ?:cll year tomleld ):Lghe!‘ and brought n more money in the aggregate than ever before. In the mnuzg- picture theaters, the sound movies were theé outstanding development and did much to increase attendance. The vaudeville chains did fairly well, but the legit- imate stage had many failures and few successes during the year. Employment At High Level. Employment has heen general throughout the fiscal year at high levels of wages. There have been some work- ers out of jobs, but this is always the case and is accounted for largely by vol- untary unemployment change from one Job to another and the travel of mi- gratory workers. The buying power of ;\,1"}1 wage-earning public is extremely igh. There were few major labor disputes during the year, the most important one being the troubles in the textile mills of the South which have not yet been entirely composed. The foreign trade of the country showed a marked gain in exports. For the first four months of this year the gain in exports as compared with 1928 averaged around $70,000,000 a month, This compared with an average gain of $54,000,000 a month in imports. In May imports exceeded exports by $14,- 000,000, but the balance of trade for the a\ve months was favorable to this coun- Y. No Recession Imminent. There is no recession in business or industrial activity apparent as the fiscal year ends. The great danger and the one major unfavorable factor in the sit- uation is the agricultural situation. After all is sald, the greatest buying factor in America is the farmer, and failure to better his position is bound to have a deleterious effect. However, the Summer recessions in industry are likely to be smaller than normal and the volume of business already bookad is sufficient to keep the industrial lants well occupied for some monchs to_come without heavy new orders. It is yet too early to determine how the farmer will come out this year. If he is even moderately successful, the business situation seems likely to be bright, indeed, for other lines are flour~ ishing, as the above resume shows. Money seems to be ning also and this should have a favorable effect. ‘The weather is a big factor and this may determine easily the volume of sales in certain lines. Business men in consequence of these facts dre not in- clined to over-extend themselves. They are optimistic, but not over-optimistic. ‘There is likely to be some check to ac- tivity. This would be normal and healthy and expected, but there is not | resent to indicate any re- | cvidence at sesston which would be long continued or which would be of sufficient volume o prevent the calendar year of 1929 from being one of the most profitable the country as a whole, excepting the experienced, agriculturists, has ever were those in the government and municipal issues of Poland, Greece, Bulgaria and Italy, which ranged from 5 to 10 points. French and Belgian obligations, as well as those of Holland and the Scandinavian countries, were naturally affected, though more by money rates than by other unsettling factors. Short-Term Readjustments. The high terms exacted for corpora- tion and municipal financing during the six months' period compelled a sharp readjustment in the prices and yields. not only on old issues, but on those that had to be offered to provide new capital. Short-term obligations were readjusted to the current money rate, which meant that, whereas they had been selling on from a 4% per cent to a 41, per cent basis a year ago, they were fixed between a 5}z and 6 per cent level. Municipalities found it quite impossi- ble to sell long-term bonds and there- fore arranged their financing to mature beyond the probable period of extreme interest rates, This brought out a large number of short-term tax exempt issues with ylelds of between 5!, per cent and 6 per cent which, to tfi: corporation purchs them, gave a net return from around 6.20 per cent to about 6.75 per cent. At one time the mber and December Treasury certificates were available at a price that returned the buyter a net income of well over 6 per cent. ‘The conditions above outlined were mainly due to the effect of high money rates in this country and abroad and to the fear that an unsatisfactory con- clusion of the Paris debt conference might lead to difficulties in the way of meeting interest payments and matur- ing obligations. There were, however, other influences at work which laid a heavy burden on the investment market. Chief of these was the practical boy- cott by the investor of bonds owing to a strong temporary preference for com- mon stocks or for debenture issues con- vertible into st resulted in the selling of bonds in exchange for “‘equities” on a very large scale, not only by private investors, but by institutions. 1t further brought out an enormous vol- ume of stocks in response to the wide- spread demand for them. Eventually this market was glutted and became as badly congested in the form of common stocks as it had been in bonds the year previous. New Issues Down Sharply. In the first five months of this year the total issues of bonds were $1,562,~ 000,000. This compared with $2,898,- 000,000 in the same period of 1928 and was 50 per cent smaller than in the first five months of 1927. While every form of bond financing showed a shrinkage from the 1928 output, the largest losses were those in the public utility and foreign groups. The total for the first type of borrowers was $351,- 567,000 this year and $788,600,000 in the January-May period for 1928. A much greater decline occurred in foreign financing, which was $120,000,000 for the five months this year and $685,000,- 000 for the same months last year. Practically no new foreign loans were negotiated the second quarter of 1929, which has been more barren of foreign financing than any similar pe- riod in the past six or seven years. Whle financing with bonds was shrinking the emissions of new capital in the form of stocks were expending at a ratio of $2 in stocks for §1 in bonds. This would be even higher if the convertible bonds, which eventu- ally become stocks, were subtracted from strictly mortgage issues. Nearly $750,000,000 -in st y or one-third of the total sold to the public, were those of investments trusts, or trading cor- porations. About 25 per cent were the issues of public utilities and 20 per cent those of industrial companies. Only a nominal amount came from the railroads, although, from the stand- t of actual values for their secur- ities, they wee in a better gflmn to sell their stock than other borrow- ers, who placed them on somewhat ex- travagant predictions of earnings in the next few years. The situation that faces the holder of bonds and the originator of new bond issues at the end of the half year, 1s not so complex as it was three months ago or at the beginning of 1929. Back of them are the maximum effects of several of the influences that have pressed most heavily on the investment market, It is not likely, for exampie, that there will be in the next six months a repetition of high average for eall and time loans that have been experi- enced since July, 1928. Nor will there be the intense competition of specula- tion in stocks and flotation of new “equities” that has had to be met with in_ this period. An improvement in either of both of these conditions would have a decidedly constructive influence on all classes of investment securities. Consequently, one may rea- sonably expect to see an average for bond prices before the end of 1929 materially above that now ruling. Public Strongly Stock-Minded. On the other hand, it has to be ‘ad- mitted that a decided change in the at- titude of investors toward the type of security which they prefer has taken place. The public is still strongly stock- minded. It believes fully in what it has been taught through various agen- cies—that stocks rather than bonds provide the largest capital appreciations over a term of years and thai the com- mon shares of strong industrial, public utility and railroad companies, as well as those of well managed investment trusts, should represent a high propor- tion of the total holdings in any port- folio. Therefore, more or less resist- ance will be shown to bond issues of an indifferent quality. In order to meet this underwriters must readjust their ideas as to price and provide a medium for financing that will not only insurc full payment of principal and interest, but permit the purchaser to share in the profits of a prosperous concern. This means that new financing is likely to run strongly to the convertible type of bonds which is economical to the borrower, for it may be floated at a relatively low rate of interest, as wit- ness the numerous 4!2 and 5 per cent debentures placed this year, and at the same time it satisfies the hunger of the American investor for capital gamns. IMPROVEMENT NOTED IN BOND MARKET Special Dispatch to The Star BOSTON, June 20.—A slight improve- ment in the tone of the hond market has been noticeable during the past few days, according to a current repart of the United Business Service. This change is undoubtedly the result of easier time money rates plus an increase in gold. imports during the past few months. Bonds, which In years past have con- sistently sold to yield less than common stocks are now selling to yield more. ‘They are, in fact, selling at lower aver- age levels than at any time since 1925. Although the unilted opinion of tne leading financial authorities of the country does not indicate a broad up swing in the bond market for the near future, it does not indicate bonds are selling close to their low point for the present cycle, IR SUGAR MELZ: NEW YORK. June 20 (#).—1ne total sugar melt of 15 United States refiners from January 1 to June 22 amounted to 2465000 long tons, compared with 2,005,000 during the same period last ear. Deliveries totaled 2,240,000 long a5 against 1,960,000,