WISE INVESTMENT
RATHER earlier than I anticipated, President Roosevelt has played his first card in checking the business recession and frankly he has played the card I least expected and least desired. By altering the margin regulations in favour of " bulls " and to the discomfiture of " bears " Washington has, of course, indicated that it would like to see a recovery on Wall Street which, in turn, implies a recognition that the continual slump in stock market prices was becoming threatening to prosperity itself. Even this gesture has been seized on to push Wall Street higher—for which relief much thanks—but I would rather have seen the Administration making some really constructive move to get business going. All one can say at the moment is that business leaders in the United States are less depressed, although they are still critical, suspicious and afraid of Washington.
The latest steel production figures leave no room for doubt that a business recession of considerable and much more than seasonal—magnitude is in being in America, and until this trend is reversed caution must remain the watchword for investors. The present is obviously no time for loading up with speculative shares, even though the odds are now in favour of a technical rally on the London Stock Exchange. My own view that American business will get into its stride again is unchanged, but it will take some time before recovery becomes an established fact rather than a hope. And I would again remind investors that the European political situation, if it is superficially less dangerous on a near-term view, still bristles with longer-term problems. The economic risks implied in the setback in the United States, plus the political risks in Europe and the Far East, must for the time being lessen the general attractiveness of equity investments. This fact is already reflected in Throgmorton Street by a level of quotation at least 15 per cent. lower than in the spring, which in turn has raised the average yield very considerably.
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