FINANCE AND INVESTMENT
By GUSTOS
WHEN it is plain even to the man in the street that in the military sense we are now experiencing the lull before the storm it would be foolish to look for much activity in the stock markets. Over a wide front quotations have already reached levels at which such factors as post-war trade recovery, E.P.T. relief and so on have been partially discounted. Against this background it is ridiculous to expect, as some people apparently do, that good .war news will automatically be followed by a sharp rise. If that were the position there would be plenty of buyers about now who would be willing to take a chance on the course of war developments. The ,truth is that speculatively-minded investors have been willing to take such risks for the past two years, with the result that steady buying in a market whose supplies of stock have not been fed by new capital issues has raised prices very considerably.
What is wanted now is some reasonably clear indication as to the likely duration of the war, which would at least enable the more adventurous spirits in the investment world to work either on the long war or the short war theory. London stores, building shares, Kaffirs, are the type of purchase which would be favoured, even at current prices, on the short war theory. A long war would increase the relative attractiveness of iron and steel, engineering and air- craft shares. There remains a wide range of investments, including home rail junior stocks and South American securities, whose post- war prospects are so obscure as to make it difficult to give thçm their right place. On balance, however, I feel that home rilils yielding anything between 6 and 71 per cent, are well worth putting away. L.N.E.R. second preference, at 34, seems to me to offer the best value, with a yield of 71 per cent, on the 1942 rate of dividend.
CABLE AND WIRELESS DECISION
Even in these days of dealings for cash stock occasionally gets into weak hands in the sense that the non-fulfilment of hopes and expectations brings selling orders. A case in point last week was Cable and Wireless (Holding) Ordinary, which fell precipitately from L841 to £791 following the board's decision merely to maintain the dividend for 1942 at 4 per cent. Optimistic estimates in Throg- morton Street had ranged between 41- and 5 per cent, in spite of the loss of business in the Far East. What the gross receipts of Cable and Wireless, Ltd., the operating company, amounted to last year is not yet disclosed. My guess is that they were good, but I can readily appreciate the board's decision to conserve resources during the war period. Perhaps we shall be told in the full accounts how much the E.P.T. liability has amounted to after the negotiations. with the Inland Revenue. At £79' the stock of the holding com- pany, yielding just over 5 per cent. without allowing for Dominion tax relief, seems to me to be a good lbck-up investment.
A LOW-PRICED DEBENTURE
Although the City's second thoughts on Argentina's change of Government, are less optimistic than its first, the consensus of opinion is still that investors on this side should ultimately draw .some advantage. Already there has been a modest recovery in Argentine railway securities, among which the 4 per cent. Debenture stock of Central Argentine has rallied from £49 to £53. This stock still seems to me .to be attractive as a lock-up investment in the light of the company's traffic increase and the chances of some improvement in the exchange position later on. Last month the company announced the payment of 41 per cent. interest on account of arrears, bringing matters up to December 31st, 1941. This leaves interest payments for eighteen months, equivalent to 6 per cent, gross, or 3 per cent, net, to be made up. Traffic receipts have latterly shown a steadily rising tendency, opening up the prospect that net revenue will show a substantial improvement in spite of higher expenses. That should allow further payments of interest later this year.
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