Evening Star Newspaper, January 1, 1930, Page 39

CREDIT FACILITIES OF NATION NOT IMPAIRED BY SLUMP IN SECURITIES | BONDS FACE COMPETITION STOCK CRASH HITS RECORD IN HISTORY OF EXCHANGE Eighteen Billions of Dollars of Market Value Wiped Out Within Period of Sixty Days. BY GEORGE T. HUGHES. pecial Dispatch to The Star. EW YORK, January 1—It is safe to say not only that the October and November crash in the stock market was the most violent in the history of the Exchange, as well as on the largest scale, but that no previous panic stir- Ted 50 g a pub- lic interes From the Atlantic to the Pacific, from the northernmost Canadian _outpost reachable by wire or radio to the Mexican border, from Europe to Australia, from the Far East to the islands of the South Seas the echoes of the collapse of the bull market were heard on every hand. Although the facts are so recent as to be in every one's mind, still a statistical picture will be helpful as a foundation for analysis. The downward readjustment in the Fall of 1929 cannot be described as other than stupendous. On Septem- ber 1, when the market was still around its high of the year, the official com- pilation of the New York Stock Ex- change shows that the number of listed shares was 1,006,068,893, with a market valuation of $89,668,276,854. On No- vember 1, after the first break and fore the secondary crash which cul minated on November 13, the marke! ‘valuation of all listed shares, which by that time had increased to 1,110,419,105, was $71,752,650,908. In other words, in 60 days mlmost eighteen billions of dollars of market value had been wiped out. George T. Hughes Showing Quite Striking. If we take individual stocks the show- is quite as striking. General Electric sold at 403 on August 20. On Novem- ber 13 the price was 1683 and the dif- | ference between the two, disregarding the fraction, is $235 a share. Now there are 7,211,482 shares of General Electric outstanding, and a shrinkage of $235 a is $1,649,693,270, or a loss of al- most one billlon seven hundred millions of dollars, and that in one stock. General Motors made its high price early in the year, on March 31 to be exact, when it sold at $91.75 a share. On October 29 the price was $33.50 a share, and a similar calculation to that made in the case of General Electric reveals a downward reappraisal of the | market value of General Motors of $2.523,000,000. The reason for the larger loss in General Motors is that it hasoutstanding 43,500,000 shares, against. 7,211482 shares for General Electric. ‘The price swings from the high to the low in other leading stocks were sensa- tional in the extreme. J. I. Case went from & high of 467 to a low of 130 in less than two months. The high was made on September 16 and the low on November 12. Columbian Carbon had a that “no public interest will be served by the reduction of the par value of the stock at this time,” and added: “On the other hand, it is likely to encourage the belief in the minds of many inno- cent people that’ it is a’ forerunner of substantial increases in dividends, with in stock at a very high price without their hopes being realized. Any attempt to change the par value of this stock, in our opinion, should be left until the selling price on the Boston Stock Ex- change more nearly approximates its real value.” Mounting Feeling of Uneasiness. ‘There were other statements in the decision adverse in effect to the general market action of Boston Edison, and inferentially to that of other utility stocks. Now, of course, this decision concerned only one company, and was | of effect in only one State, but it sent | a shiver down the Wall Street spine. The Massachusetts commissioners had said no more about the market price of Boston Edison in comparison with its earning power than had been sald re- peatedly about other electric light and power stocks, but this time the unfavor- able judgment had an official standing, and it contributed largely to the grow- ing uneasiness. All this is a_matter of history, and is well known. The point here is’that it was not any turn for the worse in the outlook for the public utility industry that alarmed speculators. It was not the discounting by the market of any such turn for the worse in the future. It was the realization, tardy, it is true, but overwhelming when it came, that the extravagant appraisal of the ad- mittedly favorable situation in the pub- lic utility field must be atoned for sooner or later. More or less the same can be said about the electrical manufacturing stocks and about various high-priced in- dustrial shares, leaders in the bull spec- ulation. There was no untoward de- velopments in the affairs of any of these corporations, actual or potential, to ac- count for a reversal of the market trend. All that happened was that the price fan far ahead of anything warranted by the most favorable possibilities. Business Situation Appraised. On the other hand, all through Lhe‘ year the market was discriminating in its choice of speculative media. It recognized the difficulties of the sugar trade, of the coal industry, of the tex- tile situation, and it was never entirely convinced t] the problem of overpro- duction of oil had been solved. It was skeptical of the ability of the copper producers to hold the irice of metal at the level they had se.. Long before the crash in the market the copper stocks had been acting badly. They plunged downward with the rest, as/ was to have been expected, but at no time during the second half of the year were they overvalued marketwise. Not quite so a case can be made out for the market ‘udgment as to mer- gers and split-ups. Repeatedly prices were advanced for no other reason than that two corporations were to be united or because two or more pleces of paper range of 239 points between October 8 |were to be given to stockhalders in place and November 13. Westinghouse Elec- tric went from 292% on August 23 to an even 100 on Qctober 29. Other ex- amples are given in table. They are without precedent in the history of the New York Stock Ex- change. And yet the fact stands out today | almost as striking as the tumultuous de- cline—which every competent observer had predicted would come sconer or Jater, although none had expected it on so large a scale—that the after-ef- fects of the crash have been far less disastrous than on any previous oc- casion of its kind. In less a month after the final break in November the stock averages had regained a third of their loss, and while prices sagged again thereafter they did so on a volume of business that “showed forced liquida- tlon was definitely over. The question is what this portends| toward the future of the market, to- ward the reaction of the market on | business and vice versa, and toward the status of the theory that for long time investment common stocks have the advantage over bonds. Two Theories on Collapse. ‘These questions cannot be answered without examination of the points in which the 1929 market collapse re- sembled other historic panics and the boints in which it differed. There are two les about the fundamental cause of the break—one that it was brought about by signs of business set- back and the other that the specula- tion broke down under its own weight and would have done so regardiess of | what had happened in the outside | world. Obviously it is inadvisable to | be too dogmatic on the subject, but| the bulk of the evidence goes to sup- | port the second of these explanations. | It is true that there was some slaci ening of the business pace in the Au- tumn months, showing itself in steel production, in automobile output and in | a moderate drop in raflroad car load- ings, but all this had followed a Sum- mer of abnormal activity. The facts | do not support the suggestion that the market reacted to an unfavorable trade outlook. That the speculation had been carried to extravagant heights no one denles, not even its most_ opti- mistic defenders. The huge absorp- tion of credit in brokers’ loans testified to an inflation never before equaled. For months stocks sold on a yield basis lower than that afforded by con- servative bonds. For a year or more they did not “carry themselves.” This was true in greatest degree of the pub- lic utilities and of the electrical manu- facturing stocks. The former sold 20, 30, 50 and more times earnings T share annually. The return on the atter was negligible from an invest- ment standpoint. All the stress was placed on the ngportunlty for price ap- | gecll!ton in the market and on the mefits supposed to accrue from mer- gers of one kind or another. | Utility Earnings High. ‘The point is that the first signs of the coming storm appeared in this same market quarter, namely the public utllity fleld. And yet there was not then nor is there now any indication of an important recession in the pnb- lic utility earnings. As a matter of act, practically every monthly state- | ment of an_electric light and power corporation, holding or operating com- pany, shows increases in both gross and net over the same month a year ago. There was nothing unfavorable in the utility outlook for the market to discount, and when it broke, it broke not because the trade was threatened, but because ?flul had been carried m_}'ahv:ll out of all proportion to values. was not until a fortnig] broke seriously. It was a rela- vely ~unimportant incident which started the list downward. The Edison Tlluminating Co. of Boston had applied to the Massachusetts Depart- ment of Public Utilitles for permission 0 the par value its stock from $100 to $25 and to shares of new for one of old. anulan the department curtly re- used. ‘The Massachusetts commissioners not ive four | of one piece. Still, even this maneuver ‘was employed only in the case of indus- tries otherwise favorably situated: an accompanying | all this be true—namely, that it was not I the foundation for the speculation which was unsafe but simply that the structure erected thereon had been car- ried th0 high—the break, sharp and de- cisive as it was, did not and does not preclude robust recovery. Effect on Business, Coming now to the effect on busi- ness of the loss in individual buying power brought about by the crash in the market and its reaction on stock prices in the coming year, there are several things to be said. One is that the losses for the most part were not losses of income. They were losses of paper profits and in some instances of capital, but salaries and wages were unaffected. There will not be for a while at least such free buying of lux- uries if anyone knows just what con- stitutes a luxury nowadays. Perhaps even more important, though not so tangible, is the way in which the losers accepted the situation. No other people on earth could have joked over their predicament or taken a disaster so light-heartedly as did the average American trader in stocks in the great panic of 1929. In one not large Wall Street house a young man operating in a single high-priced volatile indus- trial issue had run up a paper profit of a half million dollars. It was more money than he had ever dreamed of having. His wife begged him to take his profit and he had arranged to take & European trip in January, but when | the market turned he was still long of | his stock and then he made the fatal | technical error of a speculator In try- | ing to average on the decline. He lost every cent of his profit and something more beside, but after it was all over | he laughed and said, “I'll get it all | back.” Some years ago a young professcr in | an Eastern university married into the family of a Midwestern capitalist whose name has figured in many & Wall Street merger story during the last 12 months. The salary of a college pro- fessor was too small for the wife he had acquired and so his father-in-law gave him & job in one of the many large industrial plants he controlled. Of course the young man was in the market and at the beginning of Sep- tember he had a $300.000 profit. After the smash he had $30,000 left and he said, “I feel as if I were back in the university.” Now speculators who can take losses in that spirit are not going to curtail their scale of living importantly. They may cut down temporarily, but their misfortunes will not have any perma- nent effect on business. Investment Argument Arises. Whether or not the pronounced pub- lic preference for stocks over bonds. a8 investments will survive the lesson of the market collapse is a question not S0 easy to answer. For two or three years ncw the theory has gained wide acceptance that for permanent holding with adequate diversification, common stocks are just as safe s bonds and much more profitable. Prior to the break in the market the skeptic could not gain a hearing. Was not the prop- osition convincingly demonstrated by the market itself? To this query there was but one answer. Those who had bought stocks in sound companies and had held them undisturbed by minor fluctuations, had large profits, whereas those who had put their savings into orthodox conserva- tive bonds had seen their capital de- preciate in market price. e bond market was deserted. New flotations diminished to the vanis| point and foreign governments, w) early in the post-war ers had come to this country to finance themselves, had to relv on their own resources. Investment houses which since their foundation had dealt only in bonds and had eschewed astccks as fit only for reckless speculators were forced to re- vise their programs. A horde of in- vestment trusts, so-called, sprang up to capitalize this public appetite for the eemmon stock. alleged ready to point menommmnwmfihrfl‘d % the consequent result of their investing| distribution to meet general conditions THE EVENING STAR, WASHINGTON, Curb on November 4, when a Service common appeared. CHAIN STORE HEADS EXPECT GOOD YEAR Leaders Look Forward With Confidence to Increase in 1930 Business. In the combined judgment of the executive heads of leading chain store companies throughout the United States, the coming year presents an en- couraging prospect. These executives voiced their views in a posium pre- pared by the National Chain Store As- sociation, of which their companies are members. Many of these leaders point out that . even if a recession should occur in| other industries the chain stores wili continue to progress because they de»l in the necessities of life and their economies and advantages are more thoroughly understood by the consumer than at any time in the past. Statements of Executives. The statements of the executives follow: Willlam H. Albers, president Kroger Grocery & Baking Co., and president National ~Chain Store Assoclation: | “There is substantial optimism among chain store merchants regarding both the present and future. Chain store companies are as sound as ever in the history of this developing industry. Cheaper money and the strong cash po- sition of American industry are gen- erally reassuring. As a consequence of all factors the chain store companies look forward with confidence to con- 'ilgnsl‘l)esl and expanding business during R. W. Lyons, executive secretary, National Chain Store Association: “No type of business is more inherently stable than that of the merchandising chains which sell the necessities of life at low unit cost. Because of their economical methods of purchase and scientific processes of distribution, which permit the sale of merchandise at substantial savings to the consuming public, prosperity is assured in 1930." George B. Everitt, president Mont- gomery Ward & Co.: “In view of exist- conditions I do not believe that re- tail sales during at least the first half of 1930 will come up to some of the optimistic forecasts.” George M. Gales, president, Louis K. Liggett Co. I know of no reason why business in our industry during the coming year should not be satisfactory. While certain sections of the country may be temporarily affected by recent overproduction I belleve that any effect of this will be more than offset by im- provements in other sections as a result of activity in other industries. With a combination of good wages and a minimum of unemployment I know of no reason why the spending power of the public should be diminished.” See Greater Patronage. Thomas H. Roulston, president Thomas Roulston, Inc.: “Chain-store patronage will continue to mount be- cause the chain is ever ready to change merchandising methods and systems of in the economic development of our country. Profits will continue to be tisfactory, due to larger sales volume ind lower operating expense. The 1929 speculative fever will soon be forgotten and business for 1930 will be conducted along conservative lines,” F. H. Massman, president Nationall Tea Co.: “From a food-chain operator's point of view, the year 1930 looms bright in prospect as any past 10 years. The advantages of economical and san- itary methcds of food distribution as offered by well regulated chain stores are more thoroughly understood by in _the past.” P. H. Metzger, president, the Wash- ington Shirt Co.: “Concerning the out- look for 1930, we feel that the first three months be below normal and will mean a lot of hard plugging. As soon as the Spring business opens up we will find a gradual picking up of business. No doubt we will find that by that time everything will be ad- year we will total up the usual year's usiness.” Charles F. Adams, treasurer. First National Stores, Inc.: “The large num- ber of increased outlets which we have established during the past year should in 1930 become additional profit produc- ers and, basing my judgment on past experience, I believe it more than likely that the earnings of chain food stores, particularly those that are steadily de- veloping, will show reasonable gains, as they deal altogether in the neces- sarfes of life and other staple mer- chandise which only an extraordinary decline in general business could re- tard. rules would apply and the old con- servatism would again come into vogue and that bonds would be re-recognized as the only fit investment securities. Of course, if this is true it will militate against recovery in the stock market; but is it true? Stock Theory of Investment. ‘The two Erl.nclpll arguments in favor of the stock theory of investment are, first, that stocks protect one against a depreciating dollar, and, secong 'ih.l: it the equity represented by the constantly growing, whereas the interest of the bondholder in his security is fixed by the principal amount thereof. ‘The first of these claims may be dis- missed from consideration in a cycle of falling commodity prices, but the sec- ond is not so easy to dispose of. It is true that the owner of a com- mon stock paying 5 per cent in divi- dends is better off thar the owner of a bond paying 5 per cent in interest, as- suming that the stock is of a company with a favorable outlook and that a substantial proportion of earnings is reinvested in the business. The pro. tection that generous diversification glves against the mishaps common to all investment makes a favorable com- parison with the safety of principal supposed to be secured by an invest- ds. How far the fundamentals of the case will appeal to the investing public un- der gfl t conditions is a ‘matter of opinfon, but the trend today is still in favor of the stock and against the bond. ‘There is nothing to show that there has been or will be a wholesale desertion of stocks for fixed interest-bearing securi~ ties because of the break in 515 mar- ket. Possibly there ought what we m'dnlln < g vestment wind some indication of stock market., consumers everywhere than at any time | mill justed by Fall, and at the end of" the | r ment policy which confines purchases | list. to_bon % A peak price for a New York Curb Exchange seat of $254,000, compared with a low for the year of $150,000. Total sales of 63,000,000 shares in the month of October were the largest monthly total in history. The biggest opening transaction on record took place on the block of 225,000 shares of Cities D. C, WEDNESDAY, CURB EXCHANGE RECORDS MADE IN 1929 - The largest total dealings in any one stock in any one session took place on the Curb on October 24, when 1,151,900 shares of Cities Service common stock were dealt in. A record daily total of 7,096,300 snares was established on the Curb on October 29, on which day the ticker likewise set up a record for lateness in printing final sales, running until 6:20 p.m. CURB EXCHANGE ESTABLISHES NEW RECORDS IN 1929 TRADING Surpasses All Marks by Dealing in 1,151~ 900 Shares of Cities Service Stock. BY JOHN A, CRONE. Special Dispatch to The Star. NEW YORK, January 1.—Shat- tering some world and national records, as well as most of its own, the New York Curb Exchange sails out of 1929 50 intent on Its 1930 voyage that it scarcely notices its recent port. Mag- netized with pros- pects of skyscraper headquarters, a wider international market, a conti- nental ticker gys- tem, money and loan posts and all the increased pres- tige such improve- ments bring, the Curb hurries past harbors filled with memories of great achievements. ‘The market had to buck a series of Wintry PFederal Reserve storms and Spring’s stiff money squalls, but it steamed ahead at full speed through Summer’s calm and windless waters, only to encounter an Autumn hurri- cane, from which it emerged into an- other Winter's turbulent seas, battered and ice-coated, but with rudder work- ing and all masts standing. The Curb Exchange broke world speed records on June 14, when it han- dled 1,032,400 shares of Commonwealth and Southern Corporation—the Morgan- Bonbright utility holding company. The next day tl same stock—391,900 shares of it—enabled the Curb to run total transactions to 1,287,900, there- by outdistancing the New York Stock Exchange in volume for that session, Records Fall in Panic. ‘When a cloudburst of stocks hit the markets on October 24, the Curb sur- passed all records by dealing in 1,151,- 900 shares of Cities Service Co. com- mon stock. This record was little noticed in the excitement at the time, buy, disregarding the Commonwealth and Southern record, it had not been approached since December 21, 1916, when the New York Stock Exchange handled 790,000 shares of United States Steel Corporation common stock. Back in 1893, on February 20, the same insti- tution dealt in 957,555 shares of Reading. On November 4 the Curb brushed aside world records for openi trans- actions with an initial sale of 225,000 common shares of Cities Service. This spectacular opening, involving $9,421,- 875, completely outmatched in money value the lrrevlo\u record made by Standard Oil of Indiana on February 5, 1929, with an initial sale of 70,000 shares at 100%;, requiring $7,017,800 to consummate. This transaction was al- leged to have been made in connection with the Stewart-Rockefeller contest. Record sales of 6,337,400 shares and 7,096,300 shares were handled on October 24 and October 29, respectively. The two record days of 1929 piled up total sales of 13,433,700 shares, or only 2,088,715 shares less than total trans- actions back in 1921—the year that the Curb moved indoors from its pictur- esque open-air market on Broad Street just one block off Wall Street. 1928 Dealings Doubled. Before April 13, 1928, a million-share- day on the Curb was unknown. Two- lion-share days in 1929 were not un- common. Monthly sales rose from 27,000,000 to 63,000,000 shares, the lat- ter being attained in October. Early in July total transactions passed th 1928 aggregate of 236,043,682 shares. Sales in 1929 were more than double those of the previous year. Paralleling the great growth in trad- ing were & widening of the list of securities dealt in, a stiffening of the juirements for admittance either to 1isting or trading privileges, a broaden- ing of the area served by the tickers, as well as increasing the number ani efficiency of the machines, and sky- rocketing prices of memberships. ‘With listed securities exceeding 2,600 throughout 1929, the Curb continually loaded on new bonds and shares. The committee on listing personnel had to be doubled, a subcommittee on listing appointed, and the board of governors increased from 24 to 36 to handle the detall work arising from the $10,000,- 000.000 of new listing during the year. ‘The charting of unknown seas, strewn ‘with securities claiming varying degrees of relationship with investment trusts, was the especial task of the subcom- mittee on listing. The Curb, since it is the outstanding primary market for new and unseasoned securities, was the first exchange in this country to list the various trust and tmding com- panies. It actively trades in the securi- ties of more than 60 such corporations. International Listings Grow. Internationalization, both in listings and in the extension of the periodic settlement in stocks of foreign origin, inaugurated in 1928, continued in 1929. Through the medium of American cer- tificates :; deposit the Curb at the be- company issues having a total u.pl!.l:llinflnn ;? 300,000,000 shares and a par value of $5,000,000,000. At the close of 1929 the Curb carried on trad- ing in 100 company issues hav- ing a total capitalization of more than 600,000,000 shares, with a par value ex- ceeding $7,000,000,000. ‘Through mergers and transfers to the New York Stock Exchange the Curb lost many of its aviation securities. Mergers like Curtiss-Wright and United Aircraft, or the formation of big hold- ing companies, such as the Aviation Corporation of America, reduced the number of issues outstanding. Transfer to the Big Board of Bendix and Na- ! Air shortened ‘Transport also sl the . Acquisition of large blocks of stock, like General Motors' purchase into Fokker, reduced the floating supp! g. some aviation issues remaining ly on Curb. Of the new issues more than $3,000,- 000,000 were floated by finance, holding, investment and trading companies, more than $2,000,000,000 by foreign corporations and ogvmmmh and more than $300,000 by aviation con- S S e ar va 4 : companies, such as United tion, Commonwealth & South- em, Mohawk-Hudson Power Corpora- " Jehn A. Crone. | tively. tion, and Standard Brands, Inc.; Ca- bles & Wireless, Ltd. the British gov- ernment combination of cables and wireless companis Marine Midland Corporation, - the largest bank holding company; United States Lines, Inc., operators of the largest American senger fleet; Pennroad Corporation, the security holding company of the Penn- sylvania_Rallroad; Rudolph Guenther- Russell Law, Inc., the first advertising firm to be listed here; more Goldman- Sachs trading companles, such as Blue Ridge & Shenandoah, and several dis- tillery stocks. 1,300 Issues Pay Dividends. Although the huge volume of new issues greatly increased tHe number of securities traded in—at the beginning of 1929 they approximated 1,745 stocks, 350 domestic bonds and 150 foreign bonds as against 2,250 stocks, 350 do- mestic bonds and 150 foreign bonds at the close of the year—it did not lower the caliber of the list. About 1,200 issues were in the dividend-paying class at the start of 1929, and around 1,300 were in that division at the end of the year. The exchange broke all of its previous records on- June 14, when 125 stocks sold ex-dividend. “Penny" stocks (or shares selling at less than $1), which years ago formed the bulk of Curb transactions, now number 20, against 25 a year ago. ‘The wisdom of more exacting listing Tequirements was proved by the Curb’s recognition by numerous “blue-sky” State commissions and its approval after & two-year fact-finding inquiry by the committee of investigation of stock exchanges of the National Asso- clation of Security Commissioners. ‘These moves were followed by exten- sion of Curb ticker service from 40 cities a year ago to 100 cities, including two in Canada, at Montreal and To- ronto, during 1929. Tickers now ex- ceed 3,000 in number, or a gain of more than 1,000 during the last year. The Speculative Leaders. Public utilities, investment trusts and trading companies were the outstand- ing speculative leaders, both in point of activity and appreciation. A boom in natural gas stocks, following the great expansion of that industry, was deflated by the Autumn crash. Trusts and trading companies were battered and bruised by the waves of selling, and aviation shares registered both plane overproduction and the revision of mail rates. Radlos were not as popular as in 1928. Passing the O'Fallon decision with- out a glance, because the Curb has relatively few rails, the market recorded the benefits of red metal high prices in its copper shares, later the uncer- tainty of maintaining such a price level, The ofls again failed to flare up, despite good earnings and dividends, because of the overproduction of petroleum. These shares, however, were relatively firm during the Autumn break. Records for speedy price appreciation were made by such issues as Crocker~ Wheeler Electric Manufacturing Co., which rose from 127!, to 843 before being split 10 for 1 last September, and National Investors’ Corporation, which in five months leaped from 11!, to 391% before being split 6 for 1 in | October, Wide Price Ranges. Numerous issues showed ranges of 200 points or more. Tubize Artificial Sllz; for lmh:]ofi. l":lld & range of 439 points, and luminum Company America 293%, points, but both of these issues are rather closely held. This same comment might be applied with equal fitness to the 332-point range of Deere & Co., and the 94-point range of Gulf Oil of Pennsylvania. ‘The utilities, as a group, provided the wildest fluctuations. Common- wealth Edison, for example, had a range of 239!, points, while American Light and Traction and Duke Power registered ranges of 209 and 204'% &unu. respec- Ford Motors of nada moved between 15 and 69, and Newmont Mining between 89 and 236, and even some of the Standard Olls, like Vacuum, moved more than 68 points. Investment trusts, aside from utilities, registered the sharpest swings. Gol man Sachs from its high early in the year of 121%; tumbled to a low of 32 during November. Insull Utilities In- | vestment dropped from 160 to 26 before | rallying and Mayflower Associated from 10135 to 46%. Long before the signal was given for a stock’s departure from the Curb Ex- change to the New york Stock Ex- change, the trading public—not the gen- eral public—accumulated the issue, and their short-turn profits with a few ‘weeks previous to such transfers usually were greater than the market profits their short-turn profits within a few months after the transfer had been completed. Whether such wide short- swing profits will continue to be the rule in the present market remains to be seen. Two Special Incidents. ‘Two interesting moves occured on the market during the year. Violent fluc- tuations took place in Ford Motor of Canada “A" shares, both before and after the twenty-for-one split. Many traders bought the “A" stock believing it a good delivery against the “B” shares because they did not know the Curb listing rules banned non-voting issues. The Curb, unlike the New York Stock Exchange, reversed its ruling on non-voting stocks and admitted Ford Motor of Canada “B" which, however, n:“var has been very popular market- wi A technical situation arose in Marcon! International Marine, as & result of which it ran up from 7 to 373 before crashing. The trading public was hurt in these special situations, whereas it ‘was the general public that suffered in the Bancitaly and Canadian Marconi Accompanying these various trading, listing and market records and the Girb Exchange memberchip wab Hid up urb Excl was bid up from_ $170,000 to. #3 " the highess Se) Following the general marke! decline, which was marred by minor Curb fallures and the insolvency of an associate member, price of membership hit $150,000, but they have partially recovered. More Diversified ‘The Ourb like other ex- changes, during 1030 will rally irreg- JANUARY 1, of | try. 1930. CREDIT FOR TRADE DECLARED AMPLE Investment Bankers’ Presi- dent Says Money Supply of " U. S. Is Adequate. BY TROWBRIDGE CALLAWAY, President, Investment Bankers' Association of America. Doubtless the most striking develop- ment in the security markets of 1929 was the stock market break and stam- pede of late October and early Noyem- ber. It focused public attention very definitely and emphatically on the pres- ent period of readjustment in which business now finds itself, but it did not produce this situation. The causes of and necessity for readjustment were long in the making and were significant- ly exemplified in an extended increase in prices of speculative securities and in the use of credit in speculation. Most every one realized that a market break had to come, but for several years it ad been so frequently predicted and the predictions had been wrong so many times that even last Summer when the indices of a number of key industries turned downward few heeded the warning. I do not wish to dwell on a painful subject—the market break is still so Tecent as to be a very sore spot to many —but there are some very wholesol aspects in the situation which we can- WITH NEW E BY CHARLES F. SPEARE. Special Dispatch to The Star. YORK, January 1.—The one self-evident fact in the history of investment markets of 1929 is that the general public almost completely di- vorced itself from ponds during 11 months of the year and thok a cautious but inquiring inter- est in them in the month of Decem- ber. The present prob- | lem of houses of is- | sue and of dealers | in bonds has to do | with the probable | 2xtent to which this | public may be in- | fluenced by its un- fortunate experi- ences in stocks and by the comparative h 7 . ease in money rates Charles . oeare. (08 enew its pur- chases of investment securities. The evidence at the end of the year is that while certain groups of bonds will have broader and stronger markets the list as a whole still faces compet: tion with junior securities, and that in order to popularize new issues cf the debenture type especially, there must be given more than an attractive rate of return. In other words, the convert- ible bond has a permanent place in cor- porate financial structures from which it wil not soon be dislodged. October Rally Nipped. A graph of bond prices from January to October shows a fairly steady decline which covered an average of between six and one-half and seven points for domestic issues and was a continuation of the trend of the second half of 1928. Within this period the composite bond list touched a level lower than it had been since the end of 1925. Early in October the market began to exhibit strength and to reflect some transfer of funds from the stock market and also purchases by institutions whose port- folio of corporations mortgages had been allowed to run down while it was ex- panding in the direction of real estate mortgages. Within three weeks a rally not afford to overlook. First, we are further along in this readjustment period, and nearer to working into a sounder prosperity than a superficial view of present conditions might indi- cate. We have expanded inventories to throttle production and credit. Sec- ond, our credit structure is in a sounder condition than it has been for seyéral years. There are ample funds for busi- ness growth. Third, the productivit; of industry is unimpaired. Fourth, the buying power of the people as a whole has apparently not been seriously af- fected. Pifth;, the element of fear so spread by the market break was 58 half of November and in December, Consumption Is Problem. Ordinarily, in_attempting an_article of this nature, I should enlist the afd of research economists, and after they had analyzed the various indices of business activity and the key indus- tries and had checked and charted the various ness -~ barometers, we'd gather around a table and see what our plain, common-sense judgment made out of it all. From the econo- mists we would have a reasonably ac- curate picture of just three economic factors—production, credit and distri- bution. We'd have a yardstick on the production of new weaith by the indus- tries, the railroads, the public utilities and agriculture, We would ascertain the financial position and the avail- ability of credit to luprort that pro- duction. Then we would endeavor to make what is usually the most difficult estimate of all, namely, an appraisal of distribution. of buying power, of the country's ability to consume or absorb the products that American industry, capital and labor are equipped to produce. ‘There is no need here and now to detail the huge and undoubted capac- ity of American industry to create new wealth and maintain _an Increasingly higher standard of living. That can- not be disputed. Nor can there be any doubt but that there is ample credit for every legitimate demand of indus- ‘The whole question of forecast scems to depend on that one factor of consumption. To the extent that pro- duction has been overstimulated by ex- cessive purchases with borrowed money, there is likely to be a slackening in production until earnings and savings have caught up with expenditures; but in so far as consumption depends on psychology the outlook is clearer. Had this break affected only arti- ficial prices its results would have been much less acute. Regretably, however, it developed into a stampede that cut into intrinsic values as well as fictitious prices. This extreme phase of what in the beginning was purely a natural eco- nomic reaction has been referred to in various terms as a ‘debacle,” a etc. I have called it & pe cause, to my mind, it resembled at its worst nothing so much as the blind, unreasoning, self-destructive rush of a }nra of cattle fleeing from imaginary ears, Mysteria Has Departed. It would have been no less than wan- ton to have allowed this psychological stampede to run its destructive course and interfere with employment and the Wwholesome production and distribution of wealth, the combined process of which in substance is Jmsperlty. Sound thinking has replaced hysteria—as it has replaced optimistic illusions—and ! it 1s my opinion that our industrial and commercial system, supported by a strong bank! position, will success- fully meet the test of this readjustment period—and I have no fear for normal prosperity in 1930. As to the business in which I am most _directly interested, that of in- vestmeént securities, the outlook is promising. Many investors, having lost in pursult of appreciation in market prices, are turning to securities bought on a basis of safety of principal and a fair income yield. e investment dealers as & whole throughout the country are in a sound condition to render meu’ummu m‘t” lnd D‘l;lo;"l:- ing capital for government an - u}, e mum‘x:., on an investment basis, to investors. ularly from the lows wuchsdflh‘:‘ l“v,’h’e' Trading may not surpass or vnlluna'ot llyll year, but the Curb will continue discriminately to list securities. ‘These listings will be much more diversi. fied in character than they were in 1929, ‘William 8 Muller, skipper of the Curb, looking into the future through his marine glasses, sees the present as no time for despair. “We are the most fortunate people in the world,” President Muller declared ;0 this writer. “None o'-h:l‘ h-l\;;! !n(i joyed such s measure of continue It has, indeed, been too abundant for most of us to appreciate. As a nation we are young. atill a vast field for commer of several points occurred and it began to look as though there had been a definite bond reviv: { Then came the first of the severe Oc- tober breaks in stocks. This immediately changed the entire aspect of the invest- ment market. Prices dropped as quickly as they had risen. Between the 3d of October and the end of the | month the domestic average fell morc | than three points. It continued to de- | cline for another two weeks, and on No- | vember 14, the day after the stock panic | culminated, reached a new low average for the year. To complete the story it must be stated that as stocks rose in the second bonds regained their losses and by ths middle of this month stood at 2n aver- | age three and one-half points hi than in November and only three poin under the January figure. | Lower Grade Issues Volatile. ! Foreign bonds as a whole covered a | narrower price range during the yo: than did domestic issues, with the’ ex ception of a limited group of South and | Central American descriptions along | With a score or_more of German and | Southeastern European obligations. | While the range on domestic bonds was | between six and one-half and seven | points, that of fareigns was only two | and one-half points, with the latter in December approximating the high for !the year, made in February. However, the year in dollar bonds will be remembered more by what happened to the second and third grade credits than_by the comparative stability of the first-grade bonds, for in no group of securities, aside from. speculative stocks, were the fluctuations wider or the markets thinner than in the latest | South and Central American credits, | which sold from 15 to 45 points below | - their issue prices and at one time were | off an l\'el'lfe of over 20 points from ' the subscription level. The unpopularity of bonds during 1929 had nothing to do with their in- trinsic values, though it did relate to some extent to what was considered by the public as unattractive yields. Pri marily it reflected the spirit of specula. tion and the universal demand for part- nership in American corporations. Again, there was the competitive ele- ment between bonds and money rates, which continued from January until the reduction took place in the Fede: Reserve rediscount rates and in forms of money accommodations after stocks had been liquidated and brokers' loans had been reduced 50 per cent. Normal buyers of bonds sold them and either bought stocks with the proceeds or placed their funds in call money, where earnings for long periods were nearly twice as high as on mortgage or debenture issues that did not carry the convertible feature, Forced Selling Breaks Prices. In the final break in bonds it was in- voluntary, rather than voluntary, liqui- dation that forced prices to their low- est levels, as when institutions ahd in- dividuals were compelled to sell mort- gages in order to protect stock com- mitments or to make loans on insur- ance policies. Along with this there Was a certain amount of liquidation by those who had been out of the stock market for the past year or two but Wwho entered it when panicky conditions developed, and at that time provided themselves with funds to participate in “equities” through the sale of rail- road and public utility mortgages. The distinctive feature of the 1928 bond market was the excess of new ls- sues in the first half of the year, re- sulting in a congestion that was not re- lieved for another six or nine months. Against this was the subnormal condi- tion of the market in new offerings dur- ing the whole of 1929, both for domestic and foreign account, but the greatest expansion in stock financing ever wit- nessed. The contrast between the flota- tion of fixed interest-bearing obligations this year and the output of stocks by finance companies and those of an in- stitutional character is striking. illustrate: In the 10 months to October 31, which represents a period unaffected by market unsettlement, over 'lorr cent of the new capital promoted and offered in the American market was in the form of stocks, with 30 per cent in long and short term bonds and notes. This compared with about 45 per cent in stocks in the same period of 1928. Common stocks alone were over 50 per cent of the total, while an analysis of the preferred stock issues indicates that they were eventually to be translated into junior shares under g;eucnbed con- version arra; nts. r 11 months 0 the ratios were about are not much for the entire 12 months, fiulmm the bulk of the recent financing has been by munici- palities and not by corporations. Increased Offerings in Prospect. The effect of this was to congest the market for new stocks in the last quar- ter of 1929 as badly as it had been con- gested in bonds in the first half of 1928. For a while, at least, corporations are most_likely to uenced in their ahead, 4 be infl finacn icles by the cleaned. dmm‘:’ E'h:?mn and '.hu:' ad- valling low interest rates. flmm and stable divid | QUITY ISSUES History of Markets of 1929 Shows Con- vertibles Have Permanent Place in Corporate Financial S_lructure. expect to see in the early part of 1930 a greater flow of bond issues dnd a re- versal in the proportions of bond to stock financing. It is yet too early to indicate whether corporations will re- sort to note issues or to long maturi- tles. This will depend somewhat on their general credit. There are already negotiations under way for resuming some of the public utility refunding schemes that were abandoned in the Spring of 1928, when the bond market first began to sag under its own weight and in response to the policy of higher Federal Reserve rediscount rates that was then being initiated. Perhaps most accurate picture that might be drawn from the relation between money rates and bond prices during 1929 would deal with the fluctua- tions in United States Government se- curities, in municipal issues and in rail- road equipment trust certificates. None of these was much affected by the stock market liquidation or by oversupply. All however were unsettled during the greater part of the year by high interest rates and equally favored by the radical change that occurred in the money mar- ket between the middle of November and the end of December. The period was an embarrassing one for the Treasury Department, which was compelled to pay successively higher rates at each maturity date, and .once to go above the Federal® Reserve redis- count rate in establishing a coupon that would attract the banks and other buy- ers of this type of notes. Between No- vember, 1927, and June of this year the rate on certificates of indebtedness ad- vanced from 3% per cent to 5'5 per cent, which meant that certificates were being redeemed at a rate materially above that on notes falling due. In one instance they were ahove any rate on Government paper quoted since 1920, In spite of this, most of the new issues sold at a discount from par, and along with them went the prices of the re- maining United States Liberty bonds and Federal Land Bank issues. Money Ease Aids Treasury. which permitted Treasury Department to return to the 3'a per cent rate of two years ago, though the emissions are not parallel, as now interest on Government paper is tax exempt, In contrast to its tax- able status in 1927. In the last few weeks the highest prices of the year have been established on all Govern- ment papers, though corporation bonds are still well below the high price aver- ege of last January, and success has attended the first attempt of the Treas- ury to gather in funds thrbugh the medium of the discounted bill. Approximately the same situation de- veloped in the market for tax-exempt municipals as in Governments. From the very low basis of yield of 1928 the market expcrienced a depression that was nearly as great 2s in the period just after the war. This compelled ties like New York and Chicago to 1t revenue warrants or short- reies on a 6 per cent basis, and clozed the door to all long-term financ- ing at a figure that municipalities were willing to consider. Here, again, there has been an abrupt change, with muni- cipal borrowers obtaining good terms ind lorg maturitics replacing shor: ones. With th> program of municipal and overnment’ constraetion timt was out- lined in Wash‘ngton, there'is every in- dication that the municipaT market will rezain its place in the investment world next year. In none of the markets was there less congestion than in that for railroad equipment certificates, for the carriers had not been buying to any extent for several years, and comparatively few old bonds came into the market during the liquidating stages of 1929. But competition with money rates required an adjustment here, as elsewhere, and it was found necessary to give the buyer of new trust notes a 6 per cent return from one-year maturities and from that to 514 and 5'2 per cent for long-dated certificates. The reduction n interest rates has revised the picture of this depariment of the market, and the lat- est offerings have been under 5 per cent on.all maturities, Institution Buying Reduced. In bulk, the insurance companies, sav- ings banks and commercial banks absorb the highest percentage of all bonds avallable to ‘the investment market. The immediate future of the bond mar- ket 1s linked up closely with them, and it is handicapped considerably by the reduced buying power of these institu- tlons, due to emergency measures dur- ing the height of the stock speculation and in the aftermath of its collapse. So far as can be determined, the cor- porations, finance companies and indi- viduals were the largest lenders of money on call subsequent to August 1. Banks had been conspicuous lenders up to that time, but the requirements of their customers ‘for loans on collateral had compelled them to draw down such loans. They are today still unable to take much part in the bond market on account of collateral obligations. It is well known that savings bapks and mortgage companies, and equally life insurance companies, were called upon to make enormous advances to deposi- tors and policy holders when stocks were breaking, and that it will require some months for them to build up thetr reserves to the point where they can again buy bonds freely. Judging from evidence in every quar- ter, the small investor who had not been in stocks prior to November bought up to his limit when they reached what he regarded as bargain figures. Conse- quently he will not be in funds to any extent for bond purchases for some time. Then there is the permanent competition between common stocks and bonds, which has changed the entire aspect of the investment business. In view of these facts, we may expect to see in 1930 a response in bond prices to more favorable money conditions and to limited supplies, but an absence of the broad demand for them which dis- tinguished the latter half of 1927 and the first half of 192 Also is there probable a continua of the compro- mise between a debtor and a creditor status demanded today by investors and recognized in the form of the converti- ble debenture. (Copyright, 1930, ADVERTISING MAN SEES GAIN FOR BONDS IN 1930 Heavy financing by rallroads, pub- lic utihty and industrial companies, and possibly by foreign municipalities, will “feature the investment market during the early months of 1930, in the opinion of Frank J. Reynolds, president of Albert Frank & Co. New financing in 1930, in his opinion, will again show many of the characteristics of 1923 and 1924, but with the scope of domestic transactions probably broader than in these years. “Both investment desires and the trend of money rates again will bring bonds to the fore” according to Mr. Reynolds, *‘without, however, subordi- nating stock issues of corporations - sessing long records of large earnings lends. inly, a genz deal of new money will be needed provide for 1930 capital expenditures 1000 by railroads of public concerna.” of close to $1,000,000, and hundreds of ’ utility and B