SECURITY FIRST

New Zealand Herald, Volume LXXI, Issue 21758, 24 March 1934, Page 13

SECURITY FIRST

INVESTORS' MOTTO TO-DAY i MUCH MONEY: FEW OUTLETS YIELDS FORCED EVER LOWER j PRESSURE PRECEDES RELEASE Never, before has investment money been so' plentiful in New Zealand as it. is to-day. At the same time there is a marked disinclination ,to place funds outside the most concrete and orthodox channels. Even some of these, such as mortgages, are being avoided. . The resulfis that for the time being investment is narrowly can alisod.-Every-one seems to be trying to place their money in channels thought to be watertight, those particularly favoured being Government and local body securities and good class industrial shares. The pressure of funds in these directions has forced up all price levels and correspondingly reduced income yields. Some people with money are therefore leaving it in the bank's on fixed deposit until the specialised demand eases. Others consider that ruling high capital values cannot hold and are realising at present levels, taking the proceeds t/o the banks to hold for fixed terms until the market turns more toward buyers. Embarrassment of Riches I ' Every recent quarterly bank return has shown the result in higher accumulations of fixed deposits. It is probably true to say that to-day the banks are suffering from an embarrassment of riches. Less than three years ago they were competing for these deposits and paying 5 per cent interest on them. Today the rate is 3 per cent and, while the banks are still receiving customers' money, they no longer accept it with jj, alacrity. It is even stated that some / are refusing to take sums on fixed deposit from those who do ..not keep an account with them. Their changed viewpoint is readily comprehended. Like everyone else, they are hard put to it to find ways of using the money that combine profit with reasonable security. Similar financial conditions obtain elsewhere. The cause is uncertainty as to the, future apd, although confidence is returning, it will 'have to broaden and deepen a great deal before a normal monetary position is regained. With an improving* business psychology however,. the very constriction of abundance will contribute to its own cure. When to enter the currently favoured circle of stocks and shares, investors have to accept round about 4 per cent for their money, and even in some cases under 3 per cent (plus expectations), there is a powerful inducement to leave the financial trenches and go over the top in a more enterprising spirit. Safety First or the Main Chance There are times, such as the present, when "safety first" is the ruling motto and other times—they are usually prosperous times —when "taking a chance" for profit is the natural and proper procedure. Indeed,.-it is the essence of trade and commerce, business judgment being the successful assessment of each chance and its exploitation within legitimate limits. " ' • •- • - Meanwhile the return on established investments is daily listed at 'between 3£ and 4J per cent and even lower. Four per cent Government stocks are yielding on an average about £3 18s 5d per cent, selling at a premium. Yet no very long" search backward would discover/higher bearing stocks at much below par. British Consols were down to £52. Paradoxically enough, those were good times. As already remarked, the situation carries within itself the means, or, - . rather, motives, of correction. The mortgage market may perhaps prove more stubborn to move.- It has been roughly handled so often by the legislators., Yet investors did not take long to recover from the arbitrary methods used in the conversion .of Government loans.' ■■ ' •' . Mortgages a Stubborn Problem When it can be got, new mortgage money to-day is at 5 to 5J per cent. After all .that represents probably a 25 per cent premium on the income obtainable from other investments of class. Confidence is needed here also, but the rise in prices in one of the two great branches of New Zealand's pastoral industry must prove a powerfulrestorative. .. . In the meantime the stock exchanges and banks are being bombarded with money. This phase—carting gold to the ' Rand—is at passing one. As the clouds lift and horizons widen the craze for security first and last will be overcome ( by the' desire to put money to more ' profitable use, the spirit of enterprise ] and expansion and progress will return, , ' and the present crowding of a limited field of investment will go down as a page in financial history. / ■