CAPITAL AFTER THE WAR

Dominion, Volume 10, Issue 2955, 15 December 1916, Page 28

CAPITAL AFTER THE WAR

WILL MONEY HE ABUNDANT? SOME CONSIDERATE . SUGGESTIONS A well-known English writer, who takes a keen interest in finance, or what is known as "high finance" deals with capital,. stock, and investments in view of tho eliding of war, and expresses the views of leading members of the London Stock Exchange. Tho subject, he says, of tho supply of capital after the war, lias re-aroused in the Stock Exchange the burning questions as to what is likely to happen on the conclusion of peace. Views diametrically opposite trom each other are being expressed. The subject is threshed out continually by members of the' Committee at their informal meetings over lunch, and it reechoes from the Consol market to the other end of the House. The point is particularly germane, in that stockbrokers are being asked daily by their clients for suggestions in the way of investments that shall benefit from the conclusion of peace. While there is noticeable activity in many of the shares of industrial companies doing well out of the war, the general sentiment seems to be that to buy such shares is- skating on rather thin ice, and that a purchaser at to-day's high prices will be well advised to watch a favourable opportunity for realising beforo the war is at' an end.

This .demand for post-war investments is felt particularly in the Consol market, and undoubtedly has an influence upon the applications for Exchequer bonds. As it is a man comes to his broker nowadays and says that ho wants to put money into some stock that is not liable to be repaid in five years' time,.when the value of money may bo considerably less than it is now, and. when ho might have difficulty in replacing, with equally good security, the Exchequer bonds that will be ■ redeemed in*l9l9, 1920, or 1921. There is an element of selfishness in this argument, of course, and the broker, it may be assumed, as a rule, counsels his client to ■ put half his available capital into tho Exchequer bonds, and to utilise only the other half in the purchase of the longer-dated or the irredeemable stocks. Opinion f is widely spreacl that the Government's idea in not issuing' a popular loan at the present time, and. in continuing to finance the war with the aid of floaters, is to save interest in years to come, the Treasury action being interpreted as a clear inference that before very long the country will bo .able to borrow on 3Jor 4 per cent, terms instead of the 5 per cent., which would certainly have, to be offered now if a popular longdated loan were to be issued. The view that there may bo a strong revival in trade for a few months after the conclusion of peace is generally endorsed, l>ut how long that revival will last is a point over which there is a sharp controversy. Some men, and amongst them shrewd and .successful members, of the House, contend that the revival will tako the shape of a boom, which will last for several years, at any rate, but others hold that the spurt in trade will prove transitory and temporary. They point to ,the 'precedents of recent years, such as were set by the South African and the Russo-Japanese wars, to support their contention that if the aftermath of those two wars .turned out to be long and dreary days of depression, the conclusion of the present struggle —greatest of its kind on record—cannot fail to underline; the past experi-' ehce, and to render more probable than not a period of some years of dulness

in trade, industry of all kinds, and finance. In regard to this latter proposition, it may bo pointed out that times of depression in trado aro not necessarily accompanied by want of business or weakness in Stock Exchange markets. In point of fact, the opposite lias, been, and so may again he, trie case. i

After this war, however, tho crying need will be for money. Governments, municipalities, railways, building, every sort of borrower, will flock to the money markets for fresh capital, and the competition for money may easily have the effect of keeping up the rates of interest until demand is satisfied or trade falls away. The whole subject affords such scope for speculation, and offers such a variety of answers to the various questions arising out of it, that it requires the exercise of long experience and sound sagacity to foresee what is likely to happen. Those best qualified to judge will probably be least disposed to commit themselves to didactio conclusions when there, iff so much in the situation making for uncertainty and surprises.