The foregoing statement, in view of the great advance in industrial stocks in 1915, calls attention to the mediocre market advance of representative railway stocks. In view of the remarkable earnings of American railroads during 1916, it seems difficult to explain the very modest advance in the price of railway shares. Manifestly, the significance of present earnings is largely lost when we re

price per share was 804 on July 30, 1914; the highest price during 1915 was 95%; the highest price during 1916 was 962; while on Sept. 8, 1916, the price stood at 894. In other words, the highest average price for these representative railway stocks since the beginning of the war shows an appreciation of only 19.5 per cent. over the price level of July 30, 1914, while by Sept. 8, 1916, this appreciation was reduced to only 11-flect that the comparison is with very .14 per cent. Public-service corporation stocks have shown a similar tendency. Using 10 leading and representative issues listed on the New York and Philadelphia exchanges, the average price per share was 684 on July 30, 1914; the highest price during 1915 was 81%; the highest price during 1916 was 83%; while on Sept. 8, 1916, the price was 804. The highest price level, as compared with the price on July 30, 1914, represents an appreciation of only slightly over 23 per cent., while by Sept. 8, 1916, this appreciation had been reduced to 16.73 per cent.

unfavorable returns for 1915 and most of the years immediately preceding. Heavy foreign liquidation of American railway stocks, no doubt, has exerted its influence also. The stock market is concerned chiefly with the future and the discounting of an unfavorable railroad situation in the future has probably been more responsible than any other factor for the failure of railway stocks to keep pace with industrials in their violent upward market movement. Greatly increased traffic necessarily means increased equipment and enlarged terminals. But rolling stock, other equipment and buildings now cost more than ever before. Moreover, the labor problem has loomed threateningly over the railroads for over a year and is likely soon to be even more serious (see also XVI, Labor). Skilled labor already has aggressive

of unskilled labor will probably soon follow. In all probability the market also regards the huge traffic prevailing just now, traceable very largely to the war, as purely temporary. It is probably felt that with the return of normal peace conditions the railroad troubles of recent years will again prevail. It should not be overlooked that the prices of what the railroads sell is regulated by law, while the prices of what they must buy, terminals, equipment and labor, have been steadily rising and are not thus regulated. (See also XX, Railroads.)

The surprising thing is not that prices on the average did not seek higher levels during 1916 but that they maintained their price level as well as they did, in spite of such adverse factors as unsettled labor conditions, rapidly rising commodity prices, a crop failure in the North-ly pushed its demands and the claims west, together with heavy losses in corn and cotton, and the destructive effects of the great war itself. Just as war conditions have shaped the course of the stock market during the past two years, so it is now the consensus of opinion that the same influences will govern it in the immediate future. The general impression is that its course manifestly depends upon the duration of the war. Many stocks are regarded as certainly too high if the war should stop within the next few months; but should the war and present orders and profits continue for a year or two more, it is argued by many that present prices would be justified. Judging from the present volume of sales and the comparative firmness of prices, Wall Street is evidently proceeding on the theory that peace is still remote and that the war will continue for another year or two at least.

Prices of War Stocks.-The YEAR BOOK for 1915 called attention (p. 337) to the extraordinary rise in the price level of the shares of (1) those corporations engaged in the manufacture of ammunition, railroad equipment and army supplies; (2) those receiving orders for food and cloth

$710,489,200 in 1915, $425,086,100 in 1914, and $424,280,020 in 1913. These sales for 1916 seem large, but the figures are apt to be misleading. Owing to the closing of the New York Exchange following July 30, 1914, there were practically no bond sales for five months of that year, and during 1916 trading in Anglo-French, American foreign, British and Canadian issues constituted approximately one-third of the total. As in the case with stocks, the price level of stand

1914, one share in each of these cor-ed $931,630,950, as compared with porations could have been purchased at a total cost of $1,178. At the highest prices of 1915 these same shares represented an aggregate price of $3,882, an appreciation of 229 per cent. By Sept. 8, 1916, the price had declined to $3,111, an appreciation of 164 per cent., as compared with the price of July 30, 1914. Moreover, while these stocks increased considerably following Sept. 8, they suffered a very severe decline in the latter part of December in connection with the widely heralded peace ru-ard bond issues changed but slightly mors. In fact, the volume of sales and the accompanying decline in prices almost reached panic proportions. On Dec. 29 the prices of 26 of the stocks referred to in the table (excluding General Motors, for which no sale is recorded) aggregated only $2,425, as compared with corresponding aggregations of $2,923 on Nov. 3, 1916; $2,531 on Sept. 8, 1916; $3,548 for the high of 1916; $3,324 for the high of 1915, and $1,100 on July 30, 1914. The quotations at the close of the year thus show an average appreciation of only 120 per cent. over the prices prevailing on July 30, 1914, and a decline of nearly 27 per cent. as compared with the high price in 1915.

Even greater has been the rise in the price level of leading "ordnance stocks." Unfortunately, averages cannot well be obtained here, partly because few of these stocks were quoted on July 30, 1914, and partly because quotations have been changed so frequently by increasing the stock issues or by converting old securities into new. The combined price of nine of these stocks (comparing the quotations of July 30, 1914, with those of Dec. 31, 1915) shows an appreciation of 311 per cent. Copper stocks like wise, owing to large war orders and an increase in the price of the metal at New York within the year from 17.75 cents to 28.38 cents, have shown large advances. Babson's average price for 20 active copper stocks stood at 54.1 for September, 1916, as compared with the average of 31.9 for December, 1914.

during 1916. Babson's average price of 10 leading and representative bonds gives 93.7 as the average price for November, 1916, and 91.2 as the average price for November, 1915. The price of 93.7 for November, 1916, compares with the price of 90.7 for November, 1913, 96.4 for 1912, 98.0 for 1911, 98.2 for 1910, and 100.1 for 1909.

That bonds, with their fixed interest rate, should not appreciate materially is logical enough. We need only consider the present temptation to investors and speculators to divert the flow of capital to stock issues which permit of participation in the large profits that are now being made or are expected in the future. The rapidly increasing cost of living, the rising tendency of long-term money rates, the general feeling that interest rates, as a consequence of the war, will be materially higher for years to come, and the flotation of large foreign war issues in this country on a 52 and 6 per cent. basis with the prospect of further issues, also constitute in their combined effect a powerful deterrent to any upward movement in bond issues yielding only a moderate rate of interest and having a number of years to run before maturity. The resale to us of large blocks of American bonds held abroad and the temptation to many to invest in foreign securities, owing to their low price and the favorable rates of exchange, are additional factors that now weigh very heavily upon the price level of existing American bond

issues.

Bond Sales. During the first ten New Securities Listed.-Listings of months of the year bond sales on the securities on the New York Stock ExNew York Stock Exchange aggregat-change during 1916 occurred on a

very much larger scale than during any of the preceding three years. For the first nine months of the year such listings aggregated $1,308,300,975, or approximately twice the listings for the corresponding months of 1915 ($666,482,950) and 1913 ($633,126,315), and nearly one and threefourths times those of 1914. In fact, listings during the first nine months of 1916 exceeded the listings during all of 1915 by over 11 per cent., during 1914 by nearly 36 per cent., and during 1913 by over 35 per cent. At this rate of listings the total for the year bids fair to equal or exceed that of any year since 1909, when listings reached the unusually high figure of $2,439,656,870.

INCORPORATIONS

Intense activity on the stock exchanges, accompanied by rapidly rising prices and an abundance of newspaper comment on large profits and the placing of huge orders, almost invariably prepares the public for participation in new ventures and thus furnishes the opportunity of the promoter. Probably never before were rumors of immense orders and prophecies of unheard-of profits so persistently paraded before the reading public as during 1916. It is not at all surprising, therefore, that the last four months of 1915 and all of 1916 up to the time of writing, furnish abundant evidence of the avidity with which the public absorbed new security issues.

The poor showing of 1915 is traceable chiefly to the collapse of credit for several months following the out- New incorporations, with an aubreak of the war and the resulting thorized capital of $1,000,000 or over disturbed business operations. Thus in the eastern states, are reported as far every month of 1916, except Jan-aggregating $1,967,300,800 during the uary, presented a total considerably first nine months of 1916, as comin excess of the corresponding month of last year. Notice should be taken of the fact, however, that the large total of 1916 includes the $500,000,000 of Anglo-French bonds. Excluding this large foreign issue, 1916 listings for the first nine months of the year exceed those for the same months of the years 1915 and 1914 by only 21 per cent. and 8 per cent., respectively.

pared with only $892,372,100 and $672,360,000 for the corresponding months of 1915 and 1914. For the 12 months, October, 1915, to September, 1916, inclusive, new incorporations aggregated the extraordinary total of $2,925,770,000, or almost three times the amount reported for the preceding 12 months. New securities issued by existing corporations totaled $1,712,826,300 during the first nine months of 1916 and $2,174,617,000 for the 12 months from October, 1915, to September, 1916, inclusive. These figures are, respectively, 2.20 and 2.13 times as large as those for the first nine months of 1915, and for the 12 months from October, 1914, to September, 1915. These totals are all the more significant when we reflect that since the opening of hostilities abroad we have loaned over $1,500,000,000 to foreign borrowers and have reduced our indebtedness abroad by about $1,800,000,000 through the repurchase of American securities held in the belligerent countries. The flotation of motor, munition, steel, chemical and engineering stocks, particularly in the lines profiting from war orders, represents a large part of the total. It may be added that an examination of the most active of this type of new issues during the year

shows that most of them reached their highest price level during the period of flotation and that in the great majority of cases present price levels are much below the quotations prevailing at or shortly after the period of flotation. The aggregate underwriting price of 15 representative and important stocks (of the type indicated and floated during the year) was $882. The aggregate "highest price" of these same stocks (attained in 10 out of 15 instances during the month of flotation) was $1,259, or an increase of 42.5 per cent. over the underwriting price. In August the price was down to $777, a decline of over 38 per cent., as compared with the highest price, and of nearly 12 per cent. as compared with even the underwriting price.

$894,947,500 $1,534,254,300

can be discounted at 34 per cent. Throughout the year the monthly average for demand loans in New York has never exceeded 3% per cent., while during February the average was as low as 14 per cent. Time loans never averaged higher than 4% per cent. (July), and during most of the other months ranged between 3 and 34 per cent. Neither crop-moving demands, record-breaking business at high prices, nor several months of million-share days on the New York Stock Exchange seem to have had the slightest effect on money rates. During 1915 low money rates were one of the primary causes back of the violent and long sustained rise in the stock market. Now it may be said that there can be no doubt that present abundance of credit at unusually low rates is largely responsible for maintaining during 1916 the high prices reached in the preceding year.

Great Britain's policy of sending gold to this country and the new Federal Reserve Act. Great Britain's wishes are manifestly to liquidate at highest prices such American securities as she may hold and wish to sell to us, and to effect loans in the United States at the lowest possible rates of interest. With easy money

THE MONEY MARKET Money-market conditions during all of 1916 were the opposite of what The unusual situation of abundant might have been expected during a credit at low rates is chiefly the reperiod of great speculation and busi-sult of two principal factors, namely, ness prosperity. In fact the phenomenon of present low money rates is contrary to all former precedents. It is an axiom of the Street that low money rates encourage higher stock prices, and vice versa, that great activity in the stock market and in business at inflated prices causes money stringency and higher interest rates. At the time of writing (mid-rates and firm stock-market prices, dle of November), however, after nearly two years of stock market boom and one year of excellent business, we have the spectacle of brokerage houses getting all the call-loan credit they want at 24 to 34 per cent., while prime commercial paper

large loans certainly can be distributed in this country to better advantage. Great Britain also has entered upon a policy of mobilizing American securities with a view to using them in this country as pledges for loans. Her advantage in carrying out this