INVESTMENT MARKET

Manawatu Standard, Volume LVII, Issue 304, 23 November 1937, Page 12

INVESTMENT MARKET

REASON FOR PRICE FALL. INFLUENCE OF AMERICA. “If it were not for the American debacle we should in all probability have seen the prices of good investments ranging around the figures ruling in the earlier part of the year,” said Mr Andrew Hamilton, chairman of the Wellington Stock Exchange, at the' annual meeting. He stated that business showed in the first few months strong and steady buying with increased prices in the good classes of industrial stocks, due to the improved industrial condition at Home and the demand for metals following the big re-armament plans. Metal prices climbed steadily till about the middle of March, when a turn set in which was folowed by a steady decline, culminating in a sharp drop over the last few weeks. Barrier stocks suffered mainly and prices to-day were considerably below the levels ruling at the end of the first quarter of this year. THE FEAR- OF WAR. . “With the beginning of the decline in prices,” Mr Hamilton continued, “investors at this end of the world were inclined to believe that the falling off was due to fear of war, and it was not until some two or three months ago that it was realised that the disturbed state of American industry and the American financial market was the real cause of the set-back. “So far as any possibility of war is concerned it has gradually become apparent that there has been probably less likelihood of a clash than there was just prior to Italy’s invasion of Abyssinia. A full realisation of Britain’s true strength coupled with the evidence of foreign respect for England for the calm and dignified manner in which the nation came through the abdication has removed for the time being any fear of conflict, and this is further supported by the news to-day of the reduction by Lloyd’s of the war risk rates on cargoes through the Mediterranean. “Consequently, if It were not for the American debacle we should in all probability have seen the prices of good investments ranging around the figures ruling in the earlier part of the year. Unfortunately, however, America, with all her resources and freed from the strain and suffering that most other countries of the world experienced in the Great War turmoil twenty years ago, has made probably the poorest post-depression recovery of any of the leading nations of the world. With her failure to come through the struggle with anything approaching the measure of success achieved by' Britain, resort was had to Governmental economic attempts to cure her ills. The reperoussions from these untried theories have made themselves sadly felt during the last few months. The undivided profits tax has closed the avenue to longterm investment in companies which are debarred from conserving in prosperity reserves to tide them over lean periods. A plain illustration of this is shown in Germany, where a similar tax has caused companies to pay out practically all profits and depart from the sound procedure of building up reserves. “Further serious American legislation in the form of the tax loophole Act has dealt a blow to short-term profits .which now incur full normal tax and surtax, while losses can be offset against other income to the negligible extent of a maximum of 2000 dollars only. UNTRIED EXPERIMENTS.

“It is considered in certain reliable quarters in London that Mr Roosevelt can mend the present situation at any time. Measures such as the desterilisation of gold, open market operations, reduction of margin requirements (already effected), relaxation of the S.E.C. regulations, reduction of the capital gains tax, repeal of the undivided profits tax are at liis disposal, but it is difficult to know whether he is willing to act at once rr is'withholding action with the view to obtaining some popularity for recovery prior to the Congressional elections next year. In the meantime traders are withholding normal operations awaiting some definite move from Washington, “The outstanding feature of the tragic upheaval of the fig American market as the result of economic experiments should prove n arresting illustration. Economics is y-t far from an exact science, and -m matters of finance, which is undoubtedly me of the main foundations of any country, the reasoning part of the community would prefer to see the antin'-.’ties collaborating vv ith and accepting the guidance of sound and experienced banking and business .men racher than have those views jettisoned in favour of the lure of totally untried experiments,” added Mr Hamilton.