RAILROADS: Leverage at Work

Although industrial stocks were 7% below their 1941 highs on the New York Stock Exchange, many railroad shares last week set new price levels for the year.

Railroad bonds rose even farther than stocks. Such second-rate liens as Missouri-Kansas-Texas (Katy) 4s and 4 1/2s, Southern Pacific 45, were bought in large blocks. Thanks to Wall Street's year-old mistrust of the defense boom, the abrupt conclusion of which might send many railroads into bankruptcy, these bonds could be bought at prices to yield as much as 20%. Wall Street still distrusts the boom. But...

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