It will be observed that while stock market movements do not always immediately reflect good or bad conditions in the financial world, the effect is ultimately felt. We are pretty safe in assuming that whenever loans are unduly expanded and the percentage of specie is small, these conditions must be corrected either by a halt in business or by liquidation; and the word liquidation here means a cleaning up in other lines, as well as in the stock market. It is sometimes the case that after the stock market has suffered a severe decline, there is little improvement in the monetary situation as shown in the bank statement. In January, 1907, for example, the percentage of loans to deposits was about 102%, and specie to loans about 17½%. The average price of twenty active stocks at that time, was about 130. At the present writing (June, 1907) those same shares have fallen to an average price of about 101, and there is no appreciable change in the relation of loans to deposits, or specie to loans. On June 8th, 1907, the bank statement showed loans to deposits 102%, and specie to loans a little below 19%. This state of affairs would naturally lead to the belief that unless we are vigorously assisted by some powerful factor, such as good crops, we now face a period where either a decided slowing up or an actual recession in general business is imperative. On this theory, fortified or modified by a study of extraneous effects, the speculator or investor may gain a valuable knowledge of probable future movements in the stock market. If he decides that the case is a bad one and that a set-back in business will occur, he may argue that, even if stocks are low in price, there is little hope of a material upward movement in any quarter. It would also be evident that the industrial shares would suffer more in price than the railroad shares; for, under present conditions, a decline in the price of products generally helps the railroad corporations to some extent by permitting advantageous purchases. For instance, if finished steel and iron products decline in price, the railroads might be enabled to carry out projected extensions to better advantage than otherwise, while the manufacturing companies would suffer a considerable loss of profits. It is, of course, true that a recession in business is felt in all lines, but as the selling rate of transportation is more fixed than prices of commodities, and as the producing companies gain less by a recession in the prices of the commodities they _buy_ than do the railroads, the industrial stocks are more adversely affected. This may appear as a sort of compensation for the fact that while rates for transportation do not advance as easily as prices of commodities, neither do they fall as rapidly in periods of depression.