The New York Times/1918/11/11/The Financial Situation
THE FINANCIAL SITUATION
War-to-Peace Plans Are Taking Shape
Constructive features came strongly into the foreground of factors affecting the financial and securities' situation last week, the significance of which may be some time in developing fully. In respect of sentimental influence the most important single item affecting stocks and bonds was the great outburst of relief expressed by the American people over the approaching end of the war. True, the exuberance of Thursday was built on sand instead of rock, but underneath the foundation was none the less secure. The report of the actual ending of hostilities and of Germany's surrender proved erroneous, but the vast majority of the public realized that it could have been labeled premature as well as false, for it was clear to all as the week drew to a close that the end was near at hand. The armistice terms were not yet known, but the defeat of the German armies in the west forecast the quick dissipation of Germany's ambitions. At the same time disorders within the German Empire supplied another signboard for anticipating future occurrences. It was a memorable week in an international sense, and contained the elements of memorable achievements at home. Not the least important of the latter was the outline presented by Bernard M. Baruch, head of the War Industries Board, of plans for converting industry gradually from a war to a peace basis, and a statement by Secretary of War Baker on Government contracts.
These Government officials who stand in positions of primary importance in respect to after-war activities, particularly the measures to be used to returning the armies to their former positions in the national life, answered a question that had promoted much anxious thought among bankers and business men. They pointed out that a vast amount of manufacturing in lines of materials used by the military forces much, perforce, be continued so long as the armies remain in Europe and in the home camps. In addition, it was shown that the need for a gradual alternation of industry is being carefully planned, with an eye to the continuation of labor's activities on a broad scale. The making of munitions is to be continued for some time after fighting ceases under the armistice, a measure which has a sound military basis as well as economic support. In other wars an armistice has always been followed by peace, yet the interval is not one in which the cessation of military preparations could safely be discontinued. Mr. Baker said that war contracts had not been canceled, a statement which tended to offset the many rumors heard during the week that substantial progress had already been made by the Government in this direction. Mr. Baruch asserted that the allocation of materials now reserved for war needs would be made among the private manufacturers for civilian consumption when the time arrives in a fashion which would tend to relieve a sudden contraction of operations in one line before the other could be built up. These were items for which the public had been waiting with concern ever since the end of the war came in sight. The problem of returning some 4,000,000 men to their places in industry and business is one which will require great care and foresight. It is one which will call for detailed plans and management, but the outlook was materially brightened last week through the evidence supplied from Washington that preliminary steps are being taken. Doubtless, the machinery will do considerable creaking before it begins to work smoothly; that is to be expected when unprecedented measures have to be applied to a situation containing so many complicated elements. No one may receive assurance that there will not be temporary depression in some departments of manufacturing and trade. It is possible that a period may come when labor cannot be fully employed, but the indications are that such an interval would be brief, to be eliminated as the best business and economic brains of the nation co-operated in a single purpose. The very fact that leaders of industry and of Government have been aroused to the seriousness of the problem is sufficient indication that it will be solved in satisfactory fashion.
The developments of the week which are outlined above appeared to be the more potent factors in the rise of securities. The celebration of Germany's downfall brought that day a powerful upward surge of prices, especially in the railroad stock and bond list, but the after events indicated that more than a temporary flush of triumph had found reflection in the market. The decline of sentiment from a high pitch to a normal level did not bring about a decided reactionary movement on the following day; rather, quotations continued to display more strength than weakness. This was especially true of bonds, the week's net advance in forty representative issues being not far from 3 points. In stocks the uncertainty of the credit situation probably acted to restrain speculative activities even during the time when patriotic enthusiasm was more abundant, and in this respect it was probable that limited credit facilities for the security markets was a good things. The time has not yet arrived for the diversion of increased amounts of dunds to speculation. The Fourth Liberty Loan has still to be paid for in main part, and competent judges of the country's future needs connected with the war are positive that another large loan will be necessary before full attention can be applied to the extension of credit to private undertakings. The Federal Reserve Board emphasized in its November bulletin that the nation will have to conserve its resources in the way of savings and credits for some time after the war ends.
The rise of the Republican Party into the majority interest in both branches of Congress would have received more consideration than it did in financial circles had the election not been held at the moment when war news dominated everything else. Wall Street has always looked with more favor on a Republican than a Democratic majority in Congress, and because of this attitude the election was received with satisfaction. A tempering influence, however, was the knowledge that several months are yet to pass before the result of the voting is evident in Washington, and by the thought, also, that in the reconstruction period the need of the country and of Europe calls for shoulder to shoulder work, irrespective of party. The impending expansion of Republican influence has stimulated the thoughts of bankers and railroad managers in regard to the position of the carriers after the war. In quarters where before election the belief had become fairly well fixed that Government control would not be relinquished at the specified time there is now expectation that plans will be presented to the next Congress for the return of the roads to their owners. The subject is under discussion, the purpose in view being the completion of a comprehensive program for the task of unscrambling the present merger of railroad interests, physical and financial.