Dear Sir:
At the close of a year which has presented many perplexing problems, not only to investors and dealers in bonds, but also to borrowing municipalities and corporations, there are several factors in the situation which in our opinion offer strong encouragement to every one in any way interested in bond investments.
Of special significance is the marked change in sentiment which has recently taken place. There is every indication that this country enters the new year with an unusually substantial feeling of confidence. While a notable increase in the demand for bonds would undoubtedly bring out a large amount of new financing, on the other hand, there has been an accumulation of funds during the period of depressed markets, and it is generally understood that investment dealers are carrying comparatively small amounts of bonds.
January has an almost unbroken record of higher average bond prices than the average prices in December. It is not our intention to predict an advance this January, although there are unquestionably many reasons for anticipating at least a moderate improvement; but, viewing the question in its broader aspects, we find many convincing arguments in favor of the purchase of bonds at this time. It is recognized that the decline in prices has been due to a variety of causes, which, except in a few individual cases, are not the result of any depreciation in real values. Basic conditions are admittedly sound. We, accordingly, not only recommend the judicious purchase of bonds for the investment of surplus funds, but also suggest consideration of the advisability in some cases of converting short time securities into long time bonds.
What conditions could be more favorable from the standpoint of the purchaser of bonds than an extremely low level of prices; a wide-spread belief that fundamental conditions are sound; a general feeling of confidence that the problems which have tended to disturb business during the past year have been, or are being, solved; and a conviction that we are entering upon a period of probable ease in money rates?
Very truly yours,
INDEX
Numbers refer to pages