WELLINGTON NEWS

Hokitika Guardian, 23 November 1928, Page 3

WELLINGTON NEWS

THE “HOOVER” BOOM

[Special To The Guardian.]

"WELLINGTON. November 20.

New York is enjoying a rather prolonged gamble on the Stn k Exchange, and one wonders bow long it will insr. I here have been numerous gambles on the New York Stock Ex-hang"', but they have been more or less of short duration, hut the gamble this year hue been long drawn out and very fierce. Speculation started soon aftm- the now year, and gained strength in the second quarter of the year when various records were shattered. Then thcr* was a period of quietness with spas modie attempts at boom, hut imnmdiati'ly the Presidential election was over and Mr 11. Hoover attained the position of President the Stock I'.x change began again and a week ago became very 'feverish.

The Americans are extremely fond ol statistics and many items of business which the British !n<>k upon as private ; s made nnlilh- in the Un:l'*d States. It is customary on too Slock Exchange there to keep a tally of the day’s sales, and to classify ihe shares and bonds flint change hands. On .Inno 12 last a record was established for tiie number of sales made, and flic* number on. the day was just over 6,000,000, but on Friday, November 16. the day’s business numbered over 6,762,000, which shows the extent of the gamble. And the gamble was inevitable because ol the superabundance of money in the St atos.

For about fourteen years there hotlice*: great erHit expansion f«asod n» tin* imports ol gohl ini* the ( 'a |f " ‘•'tutes, and that country holdabout TO per cent cf the world’s mom* turv gold. Several veers hack the excess credit was used hv the pii ’lr m tin* big ganih'e in Florida real estate. That bubble in time burst, causin' many firms to sink. When the tint id: boom came to an end a gamble in urban real estate followed, hut the public soon found that the rents o' iaina'de did not justify the pri:e l« '<■ to which property had 'men forred. Baulked in those directions the no' lie turned to the Stock Exchange where the prices of shares of mail order houses, chain stores, motor conin'- n : es. radio corporation and soft, drink firm wen* selling on a basis to vield bah amuch as the bonds o'f tin* I ml"d Ftates Government. The public appears to be mistakhig the past lor ih future. :■ i all events the people an* in' profiting by the experience of the n- s' All experience-V the past points clear!*to the conclusion that prkes are too high and must come down, in other words the “Hoover” boom must hurst just as the Flinida bubble collapsed. Wall Street brokers are seized oi the situation, hut they must buy or sell lust as they are instructed

clients. And Wall Street brokers must |. ( > doing remarkably well, judging '<• tlie price paid tor a scat on ihe Slur Exchange. On October 2nd the rc-or, price of £B6,not) was paid for a sent or the New York Stock Exchange. I than three weeks prior to that a sea' was sold for £82,000. In 1016 a sea cost about £14.000, while a year am the price was £IO.OOO. Besides >i* duigmg in consider:*hie publicity th-' American have developed a era'o foi forecasting the future trend of business. As a rule these forecasts do no cover a longer pc riel tV-n i mont o two. Even the world famm's Mar. nr FDiversity indulges in forecasting connection with its cour-e of e-('col-ics. One business man tak*ng the Hri yard forecasts and applying n math* niafical system of his own devising In prophesied that America wiß n ' year meet wtih a reverse, or in olTw words, that- there will he a slnni;: warn is likely to cause more havoc than t " crisis of 1967 when national hank am trust companies were howled over lie* ninepins.

The prediction is by no means exag gerated 'for it- stands to reason that a gamble of such magnitude as that now

going on in New Turk must crash

And, what then? The noise of the crash will be heard all over the world and felt in a most uncomfortable way. As it is the exchange rate between London and New York is down to -1.84 I.T-Rlths dollars, which is practically the gold export point, that is the point at which it is cheaper to ship gold to New York than to Imy dollar exchange.

Last week the Bank of England lost .1*2,600,000 in gold, and it is probable that most of the metal went to the* States. The Bank of England still has control of the European money market, and the faci that the Bank takes control of the Treasury currency notes this week will not make any great difference.