FINANCE AND INVESTMENT
By CUSTOS
AFTER their long run of success the stock market optimists have suffered their first reverse. It is not at all surprising that gilt-edged had to take the main shock. Technically, that section of the market was vulnerable to any bad news, and the alarms from the Low Countries were as much an excuse as a reason for a weeding out of the weaker specula- tive positions. It is not a bad thing that some of the more complacent optimists should have had this reminder that war must bring periodic setbacks in the stock markets, and many groups will be the healthier for this purge. Having said that, I must add that investment morale is high— justifiably so—and, in favourable conditions, I expect the gilt-edged rise to go on. The terms of the Government's new conversion loan—a 2 per cent. three-five-year bond at par—certainly point that way.
Taken as a whole, the stock markets are behaving really well in face of a number of obstacles. The home rail group, for example, is having to contend with a major disappoint- ment. So far from having clinched a deal with the Govern- ment which would enable them to pay good dividends, the railway companies have had to announce that no basis of agreement has yet been found. This means that dividend decisions on about £500,000,000 of capital will have to be postponed, since the companies will hardly be expected to make payments on any " border-line " stocks until their financial position is known. How wide is the gap between the railways and the Government I do not know, but I feel that the companies have such a strong case for reasonably generous treatment that they will not be prepared to give way. Rail stockholders should grit their teeth and make up their minds to see things through.
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