N finance, as well as in other spheres of human enterprise, there are frequently periods when even the expert seems unable to form an opinion regarding the future course of events, when the view, if obscured by a haze, does not permit of more than speculation as to what may lie beyond. At such times the markets are likely to resemble a ship groping its way through fog with the sailors endeavoring to tell by every slight sign whether the road is clear. The present time may be said to be such a period of uncertainty. It is impossible to attempt any analysis of the future. Even the events that happen from day to day fail to enlighten the searcher. If at such a time speculation takes a cautious attitude and the markets are permitted to go their natural way slowly, carefully and undisturbed by untimely speculative fever, there is good ground for the belief that everything may turn out well in the end. If, on the other hand, careless and easy optimism is permitted to gain the upper hand and cause rampant speculation to complicate the situation still further, only the worst can be expected. Of all times this is not the moment to make any haphazard investments. Stocks should be scrutinized to see whether the companies will be able to continue the dividends which have been recently increased. Bonds should be considered with especial regard to the question as to how far they are more than notes on collateral security. Short term notes should be investigated as to the priority they may or may not have over other debts of the

companies issue in them. In short, every caution and every care should be exercised by the investor to assure himself of the soundness of the securities he contemplates buying. There are undoubtedly many first-class bonds now to be had which will be able to weather any storm. There are many stocks which will always be able to pay their dividends. But there are some securities which at present prices, especially in view of their high dividend return, look very attractive, about the stability of which we know nothing. There are many of these, which a few years of hard times would reduce to such poverty as to prevent their paying any dividends at all. Simply because a stock pays a high rate of dividends now does not mean that it will always do so. In the late '80s many stocks paid high dividends that were assessed in reorganization ten years later. It is foolish to say that those things may not happen again. Insolvency means simply the inability to meet one's obligations. If the railroads continue to pile up debts at the rate which they have recently adopted they may find themselves unable to meet their obligations, should hard times fall on the country.

continue to give forth their wealth, and every field of industry is still teeming with activity. But there is, nevertheless, a lack of confidence in existing conditions. Fear that the years of plenty may be at an end, belief that a reaction is due, doubt as to the extent to which such a reaction may go, the ascendency of the radical element in politics, timidity on the part of capital to take any new risksall these things tend to undermine optimism. If continued, it can be easily conceived that this state of the financial mind might reflect on the body, and cause an actual contraction in business affairs.

The only tangible evidence that such a contraction might occur is to be found in the difficulty to enlist capital in new enterprises, or even to extend aid to enterprises already in existence. This is expressed clearly by the continued high money rates. True, the Bank of England has reduced its rate to 5 per cent., and in the New York money market rates for time money are lower than they were early in the year, while call money rates have fallen to a more normal point. Nevertheless, these rates are only low by comparison with the very high rates which prevailed only a few weeks ago. When the great advancing movement of 1904 to 1905 took place, call money rates ruled at 1 to 2 per cent., while time money was plentiful at 3% to 4 per cent. That money rates will become stiffer a little later in the year there is no reason to doubt.

The one factor on which, to a large extent, will depend the solution of the question, whether nothing more than a slight business reaction or a decided depression will set in, is as yet an unknown quantity. The crops will, to a dominant extent, determine the financial future. With even fair crops the country will be assured of another year of well-being. The fall-sown crops have had to pass a severe winter, and

only the coming spring can show whether or not they have been damaged to any extent. The view that the crops will play an important part in the developments of the year is so generally held that to it may be attributed a considerable share in the prevailing feeling of uncertainty regarding the future of business and financial affairs.

The severe winter has played havoc with commerce at many points, and has caused heavy losses to the railroads. In the Northwest especially the roads have suffered a heavy shrinkage in gross earnings, as well as in net returns; but in the East also losses have been sustained. Shippers also have suffered through failure of deliv-· ering goods in time for the demands of the retailers, while the latter have in turn failed to make profits, simply because their goods failed to arrive. So far the result of the abnormally se vere cold and snow has shown only in the returns of earnings made by the railroad companies. It remains to be seen how far the losses to shippers and retailers shall have impaired their capital and purchasing power.

In the January number I called attention to the fact that $300,000,000 or new capital had already been spoken for by various corporations for the first part of the current year. That prediction has been nearly made good already. The total amount of stock, bond and note issues announced since the beginning of the year exceeds $250,000,000, and a number of railroads that are badly in need of money are still to be heard from. Prominent among these are the Erie and the Missouri Pacific. It is probable that the only reason why these companies have so far failed to borrow new capital is because they are not enjoying sufficient credit to enable them to secure at reasonable terms any large sums of money such as they appear to be in need of. That the demands of the big industrial and railroad companies for

new capital have been satisfied by these issues of new securities is not certain. But that the demands for such purposes will be on a smaller scale during the balance of the year may be reasonably expected.

Recent declines in the stock market have caused a more conservative view to be taken of the future chances and possibilities of a number of important railroad systems. The optimistic views entertained concerning the Southern Railway, for instance, have been sadly shaken. It has been made clear that the reorganizations of ten years ago, for which certain financiers were inclined to take a great deal of credit, were by no means as thorough and on as conservative a basis as they should have been. The revelations regarding the efficiency, earning power and general condition of the Southern Railway are in striking contrast with the claims advanced on behalf of Mr. J. Pierpont Morgan and his co-voting trustees when they asked for an extension of the voting trust of Southern Railway common some years ago on the ground that they had managed the affairs of the company so well that they were entitled to an extension of the trust in order to demonstrate further their ability to lift that property to a high plane as an operating railroad and an investment proposition.

The hopes of Wall street are now centered largely on the enactment of what is known as the Aldrich bill, by which Congress is expected to amend the banking laws so as to encourage the taking out of a larger note circulation by the national banks. This legislation is not certain of success, mainly because there are many who believe that it represents merely a makeshift, and it is well known that makeshift legislation generally turns out unsatisfactorily when it is tried

in practice. The other factor which causes the financial district to feel somewhat more optimistic is that New York is now in a position to withdraw gold from London in volume. The rate of exchange is so low as to make such an exchange operation profitable. The only fear is that the Bank of England might retaliate by raising its rate of discount again. The Bank of England is at present in possession of a large reserve, and could well afford to let New York have such gold as may arrive from time to time from South Africa and other gold-producing countries that ship to London and sell the gold in the open market. A small amount of gold has thus been already engaged at this writing, but it remains to be seen how far the Bank of England will permit the exports to proceed.

Financial circles have indulged recently in some hysterics over the attitude displayed by the President toward corporations. While I have no patience with the dictum by the head of the government to the effect that there are good corporations and bad corporations, and that he has nothing against the former, I am equally unwilling to agree with the self-centred leaders of finance who fear the worst as a result of the governmental activity in enforcing the laws and calling into being such other laws as may be believed desirable to curb those particular evils of irresponsibility, most of them growing out of a lack of personal liability on the part of corporation managers. At least one year has elapsed since the activity of the government in the direction of corporation regulation became pronounced, and so far the results cannot be said to have been anything but beneficial to the public at large, and certainly not harmful to the corporations whom it was sought to regulate.

EDWARD STUART.