Show P 1 BABSON'S STATEMENT r W Dab Special to THE EXPRESS BABSON DISCUSSES THE STOCK MARKET BABSON PARK MASS MASS- During the past week almost everyone has been asking what has happened to the stock market The ers have said nothing like it since 1929 Yet the Dow Dow- Jones Industrial Average is off only about 20 from its time all high which occurred at the start of 1962 The In in- in industrials have suffered the most the utilities have suffer ed less while the railroads have suffered the least On the other hand almost every thing has suffered somewhat Real Estate Automobiles And Commodities The newspapers television and radio have made so much of the big break brenk that people are arc getting it into their heads that everything should go godown godown down in price Therefore whether they are arc looking for houses automobiles or oven eved orange groves they expect bargains and they pay no at- at at tendon to the prices of a month ago This especially applies to used cars of which there is a surplus and the dealers are aro trying hard to convert them into cash The banks are arc getting frightened and have I begun to ask their customers to reduce loans They really have no reason for being frightened but bankers are arc easily scared because it is not their money which they are arc loaning but rather the money of their customers They do not know when their customers will want to use their money to buy bargains themselves and hence the bankers must be prepared to tak take arc rare of them Most bankers were much dis by President Ken Ken- Kennedy's nedy's actions when he lost his temper over the price of steel They feel that President Kennedy is against business and profits and perhaps Is too favorable to the labor leaders Even the brokers are beginning to feel this way owing to the SEC investigations Some brokers are even unjustly saying that the past week will go down in history as the Kennedy Break Mutual Funds There has been a great sale of mutual funds during the past two years It is reported that over salesmen are I selling mutual funds today I Most of the stock exchange I firms are indulging in the sale of mutual funds They a lowed a commission oi of one oue I eighth of one percent on on list list- listed I ed stocks and cannot afford I to have their salesmen go out an and solicit small investors for forI I this fee but they get about 5 on the sale of mutual funds which commission they can divide with the salesmen When a salesman sells a aI thousand dollars worth of I i mutual funds the operators of oC the Fund must enter the stock market and buy n a taro amount ot of listed stock This has bolstered the stock market during the past two years It will be more difficult cult to sell mutual funds and redemptions will increase until the news of the recent stock market break is forgot forgot- forgotten ten When n a mutual fund hol- hol holder holder der turns in his shares to be redeemed the Fund operators must sell some of their listed stocks J I believe these mutual funds are perfectly safe but they must go down In price when n a break such ris as we have had occurs Therefore the selling by mutual fund opera opera- operators tors has been one cause of the decline In the stock market The dividends on mutual funds may not be reduced excepting the so called bonus dividends which result from capital gains which the Funds may not get for a awhile while What Will the Stock Market Do Next It is evident that there i have been many bargain hunt hunt- hunters i ers who have bought stocks the past week This has caused caus- caus caused ed some rallies rames I however do not believe that all is well There are arc many sore spots to tobo tobe bo be cleaned up by foolish investors In- In Investors although general bus mess Iness Is continuing good As I have mentioned many times before In this column there is too wide a gulf bt be tween the high prices that stocks have been selling at and their dividends These low yields are unnatural and must mut be corrected I had hop hop- hoped ed to see It corrected by a gradual and orderly decline Readers however should give much more attention to what stocks are yielding Re Re- Recent cent low yields cannot con con- continue IndefinItely without a great improvement In busl busi ness and dividends the situa- situa situation situation tion can be corrected only by reducing the price of at stocks I advise against selling invest invest- investment ment grade ment-grade grade stocks today but butI I question whether the time has come to resume Invest invest- investing Ing in the stock market I say this notwithstanding that the market has rallied and is act I ing more normally |