A HECTIC MONTH

Evening Post, Volume CVIII, Issue 121, 18 November 1929, Page 14

A HECTIC MONTH

NEW YORK SPECULATION

I October, 1929, is not likely to be forJ gotten in Wall street for a very long time; :' it was truly a hectic month, as the Press 'i cable dispatches have indicated. The r; London Stock Exchange was also more or j less involved, and it is questionable whe-

■■-- ther the effects of the frenzied selling and , '.i- the drastic deflation of the values o£ sound * and tested American investments have • ••; -wholly passed away. During the current '. ;*• month there have been periods of excited ' -'. selling and equally frantic buying. "Bulls" , i and "bears" have wrestled and fought, . ■ first one. and then the other being upper- j ; ; most; but there are indications of sub- , 't sidence of the excitement and 110 better .'; signs can be asked for than the recent ■ ■ reduction in. the Bank o£ England rate to 1 1 6 per cent, and the fall in the federal ' t Reserve Bank rate in New York last ■ week to 4% per cent. That important ' \ banking institution, the Guaranty Trust ; J' Company-of New York, in reviewing what : ' it describes as "violent reactions in stock .': prices" in the United States during Oc- , ."- tober, explains that the development really .■ "marked the culmination of a period of ■ % acute weakness that began in the latter i : part of September. It gradually gained mo- \ •I mentum until, on 23rd and 2ith October, ■ .:, was witnessed' probably 'the most drastic ' ; contraction of values in the financial his- ■ '• tory of the country. \4t f INTRINSIC VALUES STAND. j: • "But, violent as was the recession in '_■ stock prices, it was not so directly related Jrto changes in the general business outlook ; as might be supposed. As a matter of fact, .• the security markets for some time have '.- moved almost independently of trade de,i velopments. Over a long period, of course, .^.prices of stocks and bonds are necessarily " "related to the prospeots of the concerns they represent; and, in so far as other factors have; earned values, out of proportion to their intrinsic worth, the reJcent movement must be regarded as a re- "• adjustment toward normal levels. !'/: "To suppose that the selling wave of :ithe last, few weeks was due to adverse '■ "developments ;of corresponding importance ■;'in the general business situation would Vbe a fundamental error. ■ i' "A number of factors combined to pio- ; ;duce the unprecedented appreciation in irfetock prices that brought about the cor-f-irective action of the market in recent it-weeks.. One, of course, was the truly t-fine progress of the nation's leading busisjnesa concerns, which fully justified a f "'strong upward trend in stock values. But 'Jthis perfectly normal movement was imImensely exaggerated by the changed charS;«cter of the investing public. : J INEXPERIENCED INVESTORS. ,'fi' "To borrow a popular phrase of the day, Jit may be said that the American people ®have become 'investment-minded/ partly i'fas a result of the wide buying of Governi'iment field on their own account for the, vr;l>y reason of the diffusion of income in Wthe last decade, which has enabled vast if numbers of people to enter the invest;lment filled on their own account for the 3-liirst time. Security dealers were quick to .'3 take advantage of this change by establishing offices in cities and towns throughiijout the country. These offices,^" in turn, ?,; attracted thousands, of inexperienced per•"'sons into the ranks of stock-market spec:tJ.;«lators, where neither their financial .^knowledge nor their financial strength en■_;t titled them to be." ■;ji Stress is laid by the bank on the influ-ence-of psychology on small, investors, who y rushed to liquidate. It is expected that the jj;effects of the frenzied rush to sell will in *Borne degree adversely affect business, but "experience of recent years justifies the .J|hope that any recession resulting from >;'the action of the stock market will not -•be violent or of long duration."1 }; Business, according to the general view, r.ie experiencing a moderate readjustment. | PASSED THE PEAK. r.r % The Guaranty Trust is of opinion that -jit is not difficult to perceive ground for of an increasing number of 'observers to the effect that' business has passed its peak for the "current movement.". As far as its .bearing .on the "future is concerned, such a statement is extremely- vague. It can be' interpreted as ■a prediction of business depression of a ;momentary pause, such, as occurred at the ;«nd of 1927. But a perusal of current jcomment does not indicate any general ex.ipectation of a drastic recession. Some have adopted the view that • j-business policies and practices have been • irefined to such a point that the crises and ; (severe depressions which have periodically i convulsed the business world may be considered things of the past.. Such a revolutionary pronouncement requires strong .verification, and not enough time has ;pasaed since the crisis of 1920 to demonstrate the truth of the assertion. But it .Jnay be agreed that, while some readjust--jDjent is in order, there is no reason to that any violent upheaval will be 4 ;(>ntnessed in the next few montta. ;-