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That equities should have risen over 35 per cent. this year while industrial profits and profit margins have been falling has surprised a lot of people, including the Governor of the Bank. But it should not surprise the Chancellor. He has fanned the boom by making money cheaper, ending the credit squeeze and abolishing hire-purchase le" strictions. And by his bold and sensible revision of the profits tax he,has enabled some companies to increase their distributions out of declining 00- ings. I have never known an equity bull market :s° rationally based or so officially blessed. But it has been on the whole a very selective boom. The shares of the prosperous consumer-trade com- panies have been preferred to those of the not so prosperous capital-goods industries.
There may now lie ahead a period of consolida' tion for industrial equities, but when this is coin" SP pleted I am sure that the investment institulioas would be wise to increase their holdings - of ordinary shares. It is absurd to compare the 'true gross redemption' yield of a gilt-edged stock with the yield .O an equity share based on the last dividend. The investor must take account of the prospective dividends over the next few years and the potential capital appreciation which follows on dividend increases. There is no gentleman left in the investment world who now prefers bonds.
THE further rise in the gold and dollar reserves and the fall in the Treasury bill rate to £3 I Is. 8d. per cent —the lowest since early 1955— arc reminders that there is still something to go for in the short to medium dated stocks of the gilt- edged market. In other words a 4 per cent. Bank rate and a rise in the gross redemption yield basis of the medium-dated stock to 41 per cent. At the moment you can buy Savings 3 per cent. 1965-75 at 7476 to yield £4 Is. 3d. per cent. Rat and £5 8s. per cent. to gross redemption. In seventeen years there is a tax-free capital profit of 25i points. If this is 'grossed up' with tax at S. 6d. the 'true' gross yield would be £6 13s. 5d. Per cent. This is a valuable stock for any private Person laying out money for family purposes for such a period of years. The market would rise more quickly if the Government would only adjust its tap price for Conversion 51 per cent. 1974, which at 1001 cuin dividend (it goes ex dividend next Monday) gives a flat yield of £5 7s. per cent. and a gross redemption yield of £5 8s. 7d. This is quite out of line with Old Consols, which at 521 per cent. (high enough, surely), give a yield of a shade over 41 per cent. The Treasury seems to be fussing too much over the coming redemption next Iannary of £592 million of 2 per cent. Conversion stock, which is held widely by industrial com- panies. It can surely take this in its stride.
A LLIED BAKERIES preliminary figures re- ..flect the end of controls over the baking industry, for, despite increased competition, profits are substantially higher. The group profit after all charges (but before tax) has risen by nearly C I million to £6,062,000 for the year ending March 29, 1958. The net profit of £2,843,000 is a gain of £781,000 on the previous year. Weston Foods. the largest subsidiary, has contributed a net profit of £377,069 as against £323,405. Shareholders have enjoyed increased dividends totalling 30 per cent. (against earnings of nearly 80 per cent.). This included a 3 per cent. special bonus paid with the third interim dividend in August. The 5s. 'A' ordinary shares have always enjoyed a high invest- ment status, but at 39s. to yield around 31 per cent. they seem to discount, for the time being, further expansion, subject always, of course, to what Mr. Garfield Weston. the chairman. will have to say on the current outlook at the annual general meeting. A drertiver's Announcement MEMORY UNLIMITED jumped into the first railway compartment I which seemed empty: my eyes fell on a book left on the seat opposite by a previous passenger.