FINANCE-PUBLIC AND PRIVATE

To those accustomed to study the tendencies of markets, 'and also the psychology of the investment and speculative public, it has been clear for some time past that, to use a common expression, the fingers of the public have been itching for a gamble in something. Nor, perhaps, is this very surprising, for at leasetwo or three reasons could be given for speculative tendencies at the present moment. In the first place, serious as is the prolonged trade depression—and readers of these columns will certainly not accuse me of ever treating that problem other than seriously—it is a circumstance which in the past year or two has given- a considerable stimulus to high-class investment securities, unemployed capital finding its way into securities, and as is usually the experience, the movement commences with the higher class stocks. In the second place, although conditions have varied in different markets, it has, for the most part, been a case of an all-round appreciation of securities extending over the past few years so that most of those who, say, from about 1920 onwards, placed money in stocks, have received handsome returns both in dividends and in appreciation in capital values. Even when allowance is made for the reaction of the past few months, the fact remains that the list of representative stocks valued each month by the Bankers' Magazine shows an appreciation of some hundreds of millions when compared with the lowest points touched during and shortly after the War.

STOCK EXCHANGE CINDERELLA.

Reasons such as these, however, are not sufficient to account for the great rise which has already taken place in rubber shares over the past few years or to explain the manner in which excitement has grown during recent weeks until the much talked of rubber boom has become a reality. Like most "booms," the movement began in a market which had become more or less discredited and where shares, in many instances, had • fallen to rubbish prices, the fall—so far as the good class com- panies, at all events, are concerned—being due to the fact that rubber itself had fallen to a record low level. Then came the carefully organized movement for restriction of output and with it, first the steadying of the price, and subsequently the gradual improvement. At this juncture those who had carefully followed the industry acquired large lines of shares and, during the past two years it is certain that some thoroughly well earned fortunes must have been made in the rubber market and in rubber shares. I say "well earned," for it is those—and they are usually few—who have the courage to investigate conditions of an industry when shares have fallen to a phenomenally low level who generally reap the benefits of their enterprise and far- sightedness.

THE " RESTRICTION " PROBLEM.

So far as may be judged, the movement for restriction of output was arranged on carefully considered and judicious lines, so that only the other day, in reply to a question in the House of Commons with regard to restriction of output, the questioner was reminded that, quite apart from the automatic 10 per cent. expansion already provided for, there were arrangements whereby exports of rubber could be increased by paying higher export duties. In many quarters, however, and, as it tarns out, especially in the United States, the view had been taken that the restriction would be ineffective or would not be continued, and interests not concerned in the rubber restriction arrangements appear to have sold ahead quite freely to the United States only to find that they had miscalculated the course of the market. Moreover, even with these supplies, buyers in America appear to have been pretty badly caught over the unex- pected rise in rubber, their requirements being very large. It is at least something to be thankful for, however, that as against our shrinking tendency in exports as a whole, we have had some small compensation in the expansion of rubber exports to the United States and the much higher sterling value represented by such ship- ments.

THE RUSH TO BUY.

Meanwhile, of course, it is only natural that the rise in rubber (the commodity) to over 4s. per lb. should have fired the imagination of speculative buyers of rubber shares. Even at 1s. 6d. a lb. it is known that many of the companies' shares were until recently much under-valued, and although, of course, the fact of restriction of output prevents many companies from taking full advantage of the present high prices, it is urged that if this rise and this prosperity can occur with trade depression in so many parts of the world, what may not be the prospects in the event of a revival in trade generally ? At all events, it is felt that at the present price, the rubber companies have a very wide margin to draw upon and, consequently, there has been a rush on the part of the speculative public to buy all and sundry.. This, in its turn, has occasioned the usual excited rush up in values, and how great has been the advance in some cases may be seen from the following table giving, in the case of a few of the leading shares the lowest quotation of last year, the highest and lowest quotations of this year, and the present price :- Nominal

*Present Lowest Highest Lowest valuo. Price. 1924. 1925. 192 5 £1 Anglo-Dutch 58/4 34/4 53/0 46/3 2/0 Anglo-Java 5/71 1/9 3/6 2/9 £1 Anglo-Malay ..

1 11

16/0 29/4 23/9 £1 Bajoe-Kidoel 2W 25/7 47/9 41/0 £1 Batu Rata .. 11

25/0 19/0 £1 Bukit-Rajah 2 15/9 25/4 19/7 £1 Gula-Kahunpong

2 h

25/0 36/101 32/6 £1 Highlands and Lowlands 2 A- 24/6 44/3 36/6 £1 £1 Java United ." • Jugra Land .. 11 26/0 20/3 11/6 38/6 18/10 34/6 15/10 £1 Kuala Lumpur 3W 26/3 42/6 34/3 £1 Linggi . • • • 21 22/0 44/4 31/10 £1 Malacca 311 23/11 4213 35/7 £1 Malayalam 49/6 26/41 43/9 37/6 £1 Rubber P. I. Trust .. 46/9 23/3 38/6 32/9 2/0 Sumatra Para .. 5/6 2/3 4/2 3/3 £1 Tandjong 21 26/3 43/0 33/1 £1 Tandjong Malim 11 13/9 25/1 19/10 £1 Telogoredjo 4 28/9 31/111 28/0 2/0 United Serdang 6/3 2/6 4/9 3/9 £1 United Stut, Betong 41 46/3 81/101 68/9 2/0 United Sumatra 5/0 1/9 3/7 2/11 CAUTION NEEDFUL.

• From the foregoing it will be seen that in most case; present quotations are about the highest of the past two years, and that, of course, is in itself a circumstance which should suggest caution. Especially is this caution necessary if, as a result of the present boom, there should be an outpouring of new companies and, what is often more dangerous, an outpouring of " introductions " of shares to the stock markets without even the additional protection of the full and formal prospectus. It is always a difficult and usually a thankless task to give warnings in boom periods, and yet one would think that experience would have sufficiently demonstrated the fact that the general public usually loses more than it gains by a great boom, whether in mining, rubber shares, or any other speculative counter. Nor, it must be confessed, can very much sympathy be wasted upon those who find themselves caught when the slump comes. If perfectly honest and candid they would probably confess that, while in their hearts they realized that a collapse must come sooner or later, it was their inward hope that it would be someone else and not themselves who would be called upon to" hold the baby." When, however, it is a case of a rising market and a feverish rush for premiums, the one thought is to get in first, and those who would have scorned advice to purchase when the market was safe and at a low level, will then eagerly purchase the rankest outsider on any kind of tip which may be offered. In saying this it must not be supposed that I am suggesting the rubber boom may not have come to stay : that it has some solid foundation I have already recognized. Nevertheless, and because excitement is running high, I would counsel all who are disposed to take a hand in the rubber gamble to make careful

*July 14,

enquiries of their brokers before (not after) purchasing, and especially only to acquire such shares as they can take up and pay for. These are not the times when bankers are likely to be ready to advance too freely in Connexion with Stock Exchange committhents. At present the rubber boom is too small a thing to affect the money market, but I doubt if any speculative movement, whether in rubber shares or in anything else, would be allowed to go very far here without a restraining hand. Some time, and I trust soon, a real industrial revival will begin, and we shall want all possible available credits for financing it. When that time arrives, those who have acquired sound rubber shares may find, by the very reason of the trade revival, that they have acquired a permanent sound investment, but those who may be weak speculative holders of indifferent shares will be in a very different position.