FINANCE AND INVESTMENT
By CUSTOS
ONC.E again it is stalemate in Throgmorton Street, at least so far as British industrial equities are concerned. Impressed by the intrinsic merits of the shares and doubtless still cherishing the hope that the war cloud may move on without bursting, the general body of investment holders are sitting tight; hence the virtual absence of selling. On the other hand, few investors are inclined to add to their portfolios at a time when political events seem to be moving fairly rapidly toward a denouement. As for speculators, they obviously cannot see any likelihood of a sustained rise and are con- strained to stay on the sidelines. So, while there is little sell- ing, there is even less buying and prices are showing the usual tendency to droop. My advice to holders of good British industrials is to continue to sit tight. If the best happens and the political atmosphere improves, earnings prospects for for a wide range of British industries are good enough to en- sure a generous dividend yield in relation to current prices and substantial capital appreciation. If the worst should hap- pen, sound equities, as I have previously pointed out, will be as safe a holding as cash ; always provided, of course, that the investor is already in a reasonably liquid position. What shall I say of gilt-edged and the general run of fixed interest stocks? Mr. Keynes, it seems, is still unconvinced that there is any need for a big borrowing programme to involve a serious rise in money rates, and there are already many in the City who are saying hard things about the recent rise in discount rates. My own view is that it is well within the power of the Treasury and the Bank of England to pre- vent short-term money rates from moving up if they wish. All that is necessary is that the basis of bank cash should be substantially enlarged and a hint given that a lower level ot bill rates is desired. But about the gilt-edged market I do not feel quite so sure. • It is clear enough that the banks cannot wish to add to their huge portfolios, and I doubt whether the small investor is going to give much help at current prices. And after all, a 4 per cent. return on long-dated stocks does not seem, at least to me, an unduly high yield in present cir- cumstances. That would imply a quotation of 871- for War Loan, against to-day's price of 93i. At present, however, War Loan is full of a half-year's interest, which will be de- ducted next Tuesday. On an ex-interest basis, today's price is no higher than 92.
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