SECURITY FIRST

Taranaki Daily News, 2 April 1934, Page 16

SECURITY FIRST

INVESTORS’ MOTTO TO-DAY MUCH MONEY BUT FEW OUTLETS. YIELDS FORCED EVER LOWER. Never before has investment money been so plentiful in New Zealand as it is to-day (says the New Zealand Herald). 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 result is that for the time being investment is narrowly canalised. Everyone seems to be trying to place his 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 y ie!ds - Some people with money are therefore leaving it in the banks 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 to the banks to hold for fixed terms until the market turns more toward buyers.

EMBARRASSMENT OF RICHES. Every recent quarterly bank return has shown the result in higher accumulations of fixed deposits. It is probab y 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. To-day the rate is 3 per cent, and, while the banks are still receiving customers money, they no longer accept it with 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. t , ... Their changed viewpoint is read: y 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 and, although confidence is returning, it will have to broaden and deepen a. great deal before a normal monetary position is reS 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 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 procedi ire. Indeed, it is the essence of trade and commerce, business judgment being the successful assessment of each chance and its exploitation within legitimate limits. ..... j Meanwhile the return on established investments is daily listed at between 34 and 44 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 car-

ries 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 t at 5 to 54 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 powerful restorative.

In the meantime the stock exchanges and banks are being bombarded with money. This phase—carting gold to the Rand—is a 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.