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OCT
ESTABLISHED 1839
ADM.
BUS.
16 1948
LIBRARY
Commercial
Office
Rer. U. S. Pat.
York, N. Y., Thursday,,
New
Number 4742
168
Volume
Depressed Markets far High-Grade
Stock Market Forecast
Scoies Businessmen
For Failure to Combat
By ANTHONY
"Unlimited" Govt.
Preferred Stocks
GAUBIS
Investment Counselor
;
;
.
Coast
Mullendore,
C.
t
utility executive, urging greater
and
activity
in
slow
undermin¬
of life,
we we are acquiescing in
strangulation of vital fac¬
tors
of
ing destructive forces
ing
American
our
19534
says
The action of the stock market
and
"Beguiled by the diversions
inflation-
feverish activity of an
false
induced
ignoring,
weakly
of
proach to the
problem of
appraising the
or
pro¬
outlook
are
undermin¬
prices
ing
our
life, and even
the civiliza¬
tion of which
It
we
activity.
exactly two
since the
years
Dow
sup¬
are
almost
is
Jones
~t
posed
the
strength,
all
need
our
in
acquiescing
are
the
of
strangulation
principal factors of that strength,
namely,limited government, sound
money, a free market, and other
basic elements of our free enter¬
prise system.
In short, we are
pathetic because of our lack of
awareness and alertness at a time
our
Anthony Gaubis
country's and the world's
the
The above
(Continued
quotations from
on page
licized,
Series U
prediction
that
end
the
after
we
or
within
million unemployed
ten
a
World
ox
round
increases,
basis for the first post-war
inflationary
wage
or
was more
the
by
less forced on
the
showed
yields;
study
in. both
that
strong and
The Farm Program as an
Example
weak markets
Government is faced
in its efforts to place a floor under farm prices affords an
example of the basic infirmities in any and all managed
economy procedures.
The facts-are accordingly worthy of
study." It was discovered during the depressed days of the
1930's that the prices of farm products, by and large, were
lower when compared with pre-World War I than the prices
by which the Federal
The situation
of the
goods and services he needed to
"to keep up with the Joneses" in the
and
had
narrow
a
around
* V:
range
i%.
But
last
or
year
so
the
Niebling
E.
spread
has
considerably, to the ex¬
tent that the preferred stocks of
excellent companies are available
widened
produce his crops
matter of d^iy-to-
at
prices to yield V/2% or mora
yield given by the
companies' bonds.
/
in excess of the
same
demonstration of how greatly
A
yield differential has widened
is given in Table I, which com¬
this
pares
agricultural statisticians and these seekers
farm votes soon developed what they called
the yields given
offering prices of
at public
long-term bonds
(Continued on page
£6)
"parity" prices. These were the prices necessary to re¬
store the relationship, so far as prices could restore it,
that existed in a selected earlier period between agri-
government "to
We are
State and
'
(Continued on page 28);
help prevent deflation."
(Continued on page 37)
Municipal
,
Equipment
Robt.
the
in
Installment)
STATE
Trust
Certificates
MATURITIES
con¬
sistently been
maintained in
These
after
different
the
tial
day living.
few
This conclusion was the
business
!Final
tween the two
with the
the
was
at least eight
have
which
Pennsylvania Railroad
Equipment Trust
foremost
and
Washington
would
■/>-.
vice versa.
or
First
of
43)
1931, noted a
striking
cor¬
relation be¬
goods farmers were buying when measured in the
It
would seem
same way. This the bright New Deal boys soon came to regard
helpful to recall the developments
during .this period which were as a rank injustice since it indicated, so they believed, that
considered "dominant" either be¬
the farmer had "lost ground" as compared with the manu¬
cause
they were so widely pub¬ facturer and others in the economy who provided the farmer
War II.
are
period
since V-J Day.
worthwhile and
which has elapsed
months
greatest crisis."
record¬
its low for
ed
time when, as
we
we
slow
erage
to be
principal
guardian. At a
-
before,
Industrial Av¬
of this
which
data back to
EDITORIAL
or gen¬
business
ican
examined
A s We
stock
eral
preferred stocks and of high-grade long-term bonds. A study
subject made a few years ago by Wood, Struthers & Co.,
for
either
Amerway
of
rates have been interested in exam¬
time, the differentials in yields of high-grade
Certain students of interest
ining, over a period of
ap¬
which
forces
*
during the past three years re-
any
single
testing the
d e s tructive
never
of
tions
either
are
'
emphasizes the soundness of Jesse Livermore's three rules for success¬
ful investing: "Patience, more patience, and still more patience." It
also has demonstrated once again the danger of taking too seriously
the
implica-3
7
— —-—
—
prosperity, we
Wm, C. Mullendore
the
: Says it is reasonable to expect business to
levels during most of coming year and sees deteriorat¬
ing relations with Russia, short of shooting war, already discounted.
hold present
strength.
economic
our
.
early months of 1949.
way
Niebling,
bonds and
be dominating situation. Argues, from technical
standpoint, low Dow-Jones Industrial Average of 1946 will not be
broken and trend of market will probably be upward throughout
protest¬
citing current unusually large spreads between
preferred stocks, ascribes this to combination of temporary factors, including unbalanced supply-and-demand relationship. ,
Cites tax advantages of preferreds to corporations. Declares suc¬
cessful stabilization of long-term government bond market, and
abolition of double taxation of dividends, would greatly improve
v
their market position.
Mr.
which appear to
alertness
more
businessmen
among
NIEBLING
By ROBERT E.
weighing favorable and unfavorable factors in business and
stock market outlook, Mr. Gaubis analyzes psychological aspects
After
William
Copy
Price 30 Cents a
October 14, 1948
AND YIELDS
T
•
1950_
1.75 <7<>
1.90
1959____
2.575
1960
Bonds
R. H. Johnson & Co.
1956______2.45%
1951
MUNICIPAL
and
2.60
1952-__„__2.05
__2.20
2.30
„-2.375
1962
40 Wall Street,
Stock Exchange
New York 5
Philadelphia Providence
Amsterdam
Buenos Aires
Chicago
London
Bond Department
2.65
64 Wall
Members New York
BONDS
1927
INVESTMENT SECURITIES
2.65
1963—
White,Weld&Co.
Boston
Established
1961__-.___2.625
Street, New York 5
Troy
Albany
Buffalo
52
OF NEW YORK
Syracuse
Springfield
Wilkes-Barre
Woonsocket
WILLIAM ST., N. Y. 5
Bell
Bond Dept.
Teletype: NY 1-708
New York
THE CHASE
HAnover 2-0980
Teletype NY
Private
Scranton
Harrisburg
1-395
NATIONAL BANK
Wires Connect
Montreal
OF
THE CITY OF
NEW YORK
Toronto
Washington, D. C.
Columbia Gas System
HUG0T0N
;•
inc.
PRODUCTS
We
Underwriters and
W hen Distributed
BANK HART SMITH & CO.
THE NATIONAL CITY
PHILADELPHIA
BOSTON
Distributors of Municipal
in
or
will
be
glad
to
sale
of
of
Public Service Co.
STOCKS
COMMON
exercise
Warrants
the
BONDS &
assist you
connection with the
purchase
Central Vermont
CANADIAN
>■■■
additional
for
%'N
♦
stock.
Prospectus
available upon
request
and
Bought—-Sold—Quoted
Gordon Graves & Co.
INSTITUTIONAL
Corporate Securities
OTIS & CO.
Established
INVESTMENTS*
Dominion Securities
SUTR0 BROS. & CO.
Est.
1899
Members New York
Stock Exchange
120 Broadway,
(Incorporated)
Corporation
1896
New York 5
40
Exchange Place, New York 5, N. Y.
M -1
30 Broad Street, New
CLEVELAND
York 4, N. Y.
New York
Tfel. WHitehall 3-2840
Tele. NY 1-809
Cincinnati
Chicago
Columbus
-
Denver
Toledo Buffalo
Telephone REctor
2-7340
...
IRA HAUPT & CO.
Members
'
and
111
New
Teletype NY 1-702-3
Boston
Stock Exchange
Exchanges
Broadway,
WOrth 4-6000
Bell System
York
other Principal
N. Y. 6
Teletype NY 1-2708
Telephone:
Enterprise 1820
2
(1534)
COMMERCIAL
THE
;
&«FINANCIAL. CHRONICLE
•
♦
y..
.
:
Vice-President, The National City Bank of New York
Finishing Co.
Leading bank executive analyzes inflation and deflation forces in current business situation, and
tends
Preferred
&
—
SOLD
QUOTED
—
conscious
as
York 5
Teletype NY 1-583
ture
differ-^
ences
that
to
be
are
seen
business
Lonsdale Company
timent
in
sen¬
gener¬
ally today.
yon
Bought-—Sold—Quoted
Request
11
•
.
t
A
Jf
#
^
frfcpONNELL&fO.
Members
New
York
Stock
Exchange
New
120
York
Curb
Exchange
BROADWAY, NEW YORK 5
Tel. REctor
2-7815
in
that
some
this
catching
mulated
from
industries.
one
up
The fact
with
accu¬
shortages is proceeding
line to another is one oi
j
auto¬
or
us.
feel
you
little
concern
But many of you,
Members
New York Stock
Exchange
Neiv York Curb Exchange
this
39 Broadway, New York 6
that
of
reaction.
are
Businessmen
to
outlook today,
Exchange
NY 1-1557
Now Orleans. La.* Birmingham, Ala.
Mobile, Ala.
Direct wires
to
branch offices
our
it
find
thinking
think
about
very
hard
without
1919
;
J
also
Over the Counter
Securities
tinuous
buyers
out
lag behind
groups
and
they lose
well
have about reached
Frank L Hall Co.
120
Broadway
♦
New York 5
by our own personal
knowledge and experience.
We
think
the higher things go
the
as
beginning to purchasing power.
The groups
that are penalized include stock
and bond holders.
They include harder they fall. So we are ap
everyone whose income
is rela¬ to think of reaction from this in¬
over. You wonder whether a bust
tively fixed such as pensioners. flation as something sharp, violent
is around the corner, and even
They undoubtedly include a great and immensely costly, as in 1920
though you do not actually expect many white collar people.
Now we should not expect tc
We
we
York Stock
St., New York 4, N. Y.
It is.
comments
my
New
chiefly addressed.
WOrth
4-5879
the peak of our long inflationary
rise. You think the boom is about
a
that
bust
little
fear
at
gnaws
have
made
which
calculations
froiji time to time. You know show, for example, that a man
have ended in with $60,000 invested in good
inflation, and that all inflations bonds at current yields-can buy
avoid
you
the
that all great wars
Chicago Stock Exchange
and extent
tern
the main reasons why it is ap¬
propriate to examine the business
I venture to say, are
think that
Members
25 Broad
HAnover 2-0700
timing, pat¬
price advances price some present situation. Moreover, peo¬
of the markets. The ple who consult the statistical rec¬
about
1949. effects
of
inflation are uneven. ords of business know that prices
have risen to high and temporary
Those c f you The incomes of
many groups of
who are mon¬ the population
keep up with the peaks during or shortly after ever>
Alan H. Temple
etary econo¬ price rise and some,
including major war and that they have
mists, profes¬ those numerically most important, always dropped almost as sharply
sional or amateur, perhaps feel
as they
rose.
We are influencec
actually increase their purchasing
that the inflation danger is still
power.
The
incomes
of
other by these historical precedents as
ably
acutely with
Joseph McManus & Co.
tal to us, namely, the
to
Steiner,Rouse&Co.
^
—
—
out
about 1920 and
1921.
mobiles or in
We know that a long inflation¬ They can't think of 1928 and 1929
without also thinking of the early
utility or rail- ary movement creates internal
'30s. These memories strongly in¬
road equip- weaknesses which in time cause
One is that con¬ fluence our interpretation of the
m e n t, prob- its aowniall.
"
■:
It
in
are
steel
on
Bought—Sold—Quoted
gentlemen of the Controllers Institute represent many industries and trades, and
constitute a representative-cross-section of American businessmen.
Therefore I ven¬
to say that when you crystallize your feel ngs about the business outlook you reflect the
you
same
Prospectus
at work to
measures are
You
Corporation
BArclay 7-5660
well
as
Points out automatic compensatory
halt inflation.
Holds also, increased production
together with conservatism and good sense shown by business, which has been fortified by fear "bust
is around the corner," are counteracting inflationary pressures.
Contends insufficient attention has
been given to our financial strength and current absence of real monetary strain.
New York Hanseatic
120 Broadway, New
Louisiana Securities
con¬
analogy with conditions following World War I is deceptive.
devices
BOUGHT
Alabama &
By ALAN H. TEMPLE*
New Common, W. D.
Common
Thursday, October 14, 1948
.
Exaggerated Fioth in Business Outlook
:
Northern States Power Co.
II. S.
..
can
period of correction.
a
other
hand, I don't think
necessarily get the right
to
lamb0rn &:c0., Inc.
On
99
WALL
NEW YORK 5,
questions about tim¬
deflation.
Most with the
proceeds of that invest¬ ing, pattern and extent by un¬
businessmen of the present day
ment, after paying his taxes, only critically following historica1
have passed through both.
38% as much as he could have precedents, even those which have
have
ended
swer
STREET
we
an¬
N. Y.
our
in
,
Tele. NY 1-1610
DIgby 4-3122
The inflation in which
find ourselves has
TRADING MARKETS IN:
its
beginnings
Oil Stocks
STEIN & COMPANY
(successors to Goulet & Stein)
Members Nat'l Ass'n of Securities Dealers, Inc
JZ1 William St., N. Y. C. 5, N. Y.
1'Montgomery
St., Jersey City 3, N. J.
Tel. DI 4-2100
Teletype NY 1-1055
the
we
fix
defense
rise
has
been
inter¬
rupted twice in the past two
but
in each
we
the
Common
years
are
catching
up
with require¬
in
Refining Co.
There
are
Stock
consumption of specific products,
since
Bought and Sold
Bought and Sold
m BANKERS BOND ^
Floor, Kentucky Home Life Bldg.
LOUISVILLE
2,
KENTUCKY
Established
Bell Tele. LS 186
1856
H. Hentz & Co.
*
the
more
and
natural
demand
is
lines,
more
limits
to
never
the
infi¬
in certain soft goods such as shoes
and cotton
Incorporated
Long Distance 238-9
are
others.
to business.
resent
an
Factory workers rep¬
immense segment of the
New
York
Stock
Exchange
York
Curb
textiles, in semi-luxury
products, in many services, and in
a
few consumers' durables.
Even
Cotton
Again, mistakes and miscalcula¬
are made during booms.
In¬
ventories become too large or un¬
balanced.
Over-pxpansion occurs
tions
Chicago
N,
Exchange,
Board
of
well
as
as
the
for
judging whether
high or not toe
high? How much of the rise has
to be wiped out? How much wil?
prove substantially enduring?
we
prices
Are
business have 3 Vz
total
times the
Y.
Cotton
NEW YORK 4,
: CHICAGO
DETROIT
GENEVA,
N. Y.
PITTSBURGH
even
Mining
Canadian
Securities
Securities
than
of
business
SWITZERLAND
or
Telephone BArclay 7-0100
NEW YORK 6, N
Y.
Teletype NY 1-672
any
could do
the
same
Bishopsgate,
26,
Subscribed Capital-
Paid-Up
Reserve
The
l
.
.'
1
even
Capital
£4,000,000
£2,000,000
Fund
>
£2,500,000
conducts
every
description
banking and exchange business
Bank
of
Trusteeships and Executorships
also
undertaken
more
business at
Canadian
supply.
of
our
business
Stocks
ex¬
in
1939
and
we
Industrials
Banks
have
of
what
is
—
Mines
industrial
normal
Charles King & Co.
Members Toronto Stock Exchange
in
or
production.
We have
untenablv h i g h * in some
(Continued on page 25)
prices
gone
,
London, E. C.
and Zanzibar
other year are obsolete as
measures
■
in India, Burma, Ceylon, Kenya
Colony, Kericho, Kenya, and Aden *
with
technology.
M^ basic point is
this: the benchmarks of 1939, 1929
Members N, Y. Stock Exchange and Other Principal Exchanges
in
Branches
higher prices, with our pres¬
money
lies
the Government
Office:
'•'."■7
pansion is froth and excess? We
have some 15 million more people
and at least 4 million more fami^
and
African
we
or
How much
Banks
Goodbody & Co.
115 BROADWAY
Head
into
worth
business,
to
Kenya Colony and Uganda
pre¬
alike go ahead.
Trade
Exchange Bldg.
Bankers
have
made great advances in
N.
NATIONAL BANE
of
convertible
therefore
SAVINGS
of INDIA, LIMITED
prices too high in relation
supply of money? The coun¬
try has three times as much money
as before the war and people and
war
S.
BONDS
changes
Industrials
South
U.
to the
ent
British
BUY
too
are
billion
Canadian
And other Exchanges
DIgby 4-2727
and obvious similarities. The simi
prospect is brilliant borrowers and
lenders
,
fundamental
liquid assets, readily
money.
Prices
got to be higher
than prewar. In 1939 we did $9°
Inc.
New Orleans Cotton Exchange
ences
standards
Canadian
Exports—Imports—Futures
present with the past, such anal¬
ysis shows no significant differ¬
Finally, investment expenditures
tend to run in cycles. When fhr
We Maintain American Markets For:
Exchange
York
Commodity
the
for
When it about $34 billion of money, the
they pull in together. money supply being 38% of our
They will occur again this time. gross product. Currently we arc
*An address by Mr. Temple be¬
But to list these indications and doing $250 billion worth of busi¬
fore the Annual Meeting of the these reasons for reaction does ness annually with $10& billion of
Controllers Institute of America, not provide the answers to the money. The money is 43% of our
New York City, Oct. 13, 1948.
practical questions that are so vi¬ gross business,
Actually, there¬
fore, we can say that by 193P
construction programs are running
Exchange
New
substitute
no
hard work and hard thought of
current analysis. Comparing the
have
ships.
Members
New
teaching is
Raw—Refined—Liquid
larities indicate reaction from
nitely elastic. After a time the in specific lines. People borrow
pipelines fill up and supply-de¬ too much, and it becomes harder
mand relationships change.
Pro¬ to borrow or to raise capital. A1
duction has now
caught up in some point corrections must fol¬
cotton, wheat and corn, in fats low. Many see evidence that, tc
and oils and in some other farm some extent at least, dangers o'
products. It has also caught up this kind now exist.
Standard Oil Ky.
1st
there
course
interruption
ments
Ashland Oil &
of
this
buying power of this country, but
proved temporary. Now we are factory workers cannot buy all inflation. But.the differences sug¬
in another period when the rise the
textiles, all the automobiles gest that the reaction may differ
in shape, pattern and extent from
has flattened out. For about two or
support all the amusement and
months
the overall price
trend the semi-luxury trades. To main¬ the historical precedents.
has been sideways,
tain
maximum
Most people think we are in r
production
and
The general reason
why the sales, prices and incomes have to perilous situation because price?
price rise has flattened out is that be in balanced and equitable re¬ are too high. In a general way
through the passage of time, and lationships so that each group can all must agree. But how much toe
with the blessing of huge indus¬ buy the products of the others
high? "Too high" is not a very
trial output and phenomenal crops Inflation disrupts these relation¬ scientific
term. ' What standard?
case
SUGAR
This is the most fallen within our own experience
extreme casualty %>f inflation, but An easy reliance on precedent anc
bought in 1930.
of
The
1920.
Low Priced Industrials
lasted, if
with
now
1940, for more than
These distortions lead to a situa-j
eight years. It has brought com¬ tion where people cannot buy!
modity prices to a new peak, even each other's products. This is not
higher than the previous peaks in only inequitable, it is depressing
program
Mining Stocks
we
61
Broadway, N. Y.
WHitehall 4-8980
Direct wire to Toronto
COMMERCIAL
THE
Number 4742
168
Volume
FINANCIAL
&
CHRONICLE
(1535)
3
r—
I N DEX
Articks
if
and
The Five Peicent Yardstick
Neibling____
Stock Market
Cover
Forecast—Anthony GaubisL--.
____—Cover
conclusion
the
j
showed opposite result* This yardstick
;
2
Business—Today and Tomorrow—Edwin G. Nourse___^_-_i-
bership for
4
Earnings
Dividends
vs.
M.
—Alex.
Hamburg
Problems in Federal Debt Management—Falkner C.
Broader Common Stock Ownership:
Communism—J.
Allen
Broach
this title:
6
"Five Percent
Counter Dealer."
Foe of Socialism and
Remove Pegs on Government Bonds!—Thomas I. Parkinson
A New.
Philosophy of Security Selling—Victor Cook
"The 5% markup
bearing
from that article:
was
as a
yardstick for the
8
over-the-counter securities business
9
of Governors of the National Association of Securities Deal¬
State of the Nation's Business—Walter J. Matherly__
11
ers
13
ported by
Natural Gas Company
Private
Stocks—George A. Butler.
Placements—A
New
Medium
of
Financing
—Sherwin C. Badger
The Stock Market
—
to
Phelps
V
__;
business."
—Richard F. Uhlmann.____
m that
16
The New Pattern of International Trade—A.
N. Gentes
; |
17
*'
.•
.
.
■■
-i
.
-
A"
.
m'J
V-
>.v
■
.
v
:■.
Combat "Unlimited" Government-
"
yardstick"
3
Stock
osophy"
'
to Attend Hemispheric
Stock Exchanges Parley
11
Public
on
Debt
Policy,
Offer
Program
Dangers in Huge National Debt
11
this
Still Only
Dream
a
Pacific
Canadian
17
Levels
Another
19
—■____
Soft
—
__—
New Cuban
,,
Sees Some
Schmidt
P.
Picture
Spots
stituted
19
stick"
Graham Adams Defends Life Insurance Companies Private
Texas Eastern Trans.
"phil¬
contended* this
we
adoption
rejection.
or
Bell
our
and
Bank
Stocks
Insurance
stick" is
12
~~
Here
a
was
direct oppor¬
proof of
no
.V
Empire State Oil
---
were
Equity Oil
a
being taken that
poll
own
the issue and found
on
Mackinnie Oil & Drilling
Utah Southern Oil
our
BOUGHT
of
wide
18
Coming Events in the Investment Field
12
Bretton Woods Institutions".___
19
From Washington
Ahead of the News—Carlisle Bargeron—
7
on
saw
spread opposition
no error
Orvis Brothers &(?>
the
was
REctor
NSTA Notes
Observations—A.
Our Reporter on
43
Securities Now in Registration
40
The State of Trade and Industry.
S.
U.
Reg.
and
25
Park
Place,
Edwards
c/o
Copyright
CHRONICLE
Reentered
Patent Office
ary
25,
COMPANY, Publishers
to
Smith.
E.
DANA
What took
President
RIGGS, Business Manager
they tell
as
second-class
at
the
under
matter
office
post
the
Act
Febru¬
at
Union. $35.00
Dominion
Canada,
$42.00
of
Other Countries,
Every Thursday (general news and ad¬
vertising issue) and every Monday (com¬
plete statistical issue — market quotation
records; corporation news, bank clearings,
state and city news, etc.).
*■
•
Other
Chicago
Offices:
3,
111.
135
S.
(Telephone:
La ...Salle
St.,
State -0613);
$25.00
and
per
Monthly
$25.00
per
on
request
George Birkins Company
40 Exchange Place, New York 5
Tele. NY 1-1404
this subject.
on
H0DS0N & COMPANY,
If they did not, why
us
are
they silent?
what conferences they had
on
an
Why
this matter?
place at each of these and who participated?
on page
Inc.
policemen operating
165
Broadway, New York
If
35)
year:
per
year.
year.
Record
—
WANTED
•
Central States Electric
Corp.
S.
of
PREFERRED STOCKS
■
in
5
Vz %
due 1954
year.
'
Record-1—Monthly,
(Foreign postage extra.)
Earnings
interested in offerings of '1
High Grade Public Utility and Industrial
5%
Spencer Trask & Co.
Quotation
year.
OFFERINGS
are
March
of
per
$38.00
per
We
New
Rates
Pan-American
Bank
Data
judgment, they dare not for the
(Continued
Other Publications
Thursday, October 14, 1948
QUICK
stock.
No
debt
or
bank
loans.
Total assets about 4 million dollars.
*
Subscriptions in United
States, U.
Territories and Members
9576
SEIBERT,
our
precinct, the SEC and the NASD, had
same
understanding?
'
8, 1879.
$26
$5; yield 21 %.
$19.
Single class of
—
have dared the Commission to make such
In
Eng-
Possessions,
WILLIAM
of the
out
don't
C.,
1947
WHitehall 4-8957
significantly silent.
by William B. Dana
Company
Y,,
N.
&
London,
Subscription
HERBERT D. SEIBERT, Editor & Publisher
WILLIAM D.
will.
Dividends
Earnings
1948
1942,
New York 8, N. Y.
2-9570
REctor
Gardens,
Drapers'
York,
WILLIAM B. DANA
was
of the "5%
>
44
1
and,
FINANCIAL
never
34
and You
Twice Weekly
COMMERCIAL
the promulgation
Isn't it fair to believe that these two
5
Tomorrow's Markets (Walter Whyte Says)
The
we
Book Value $89
Cash
the orders, and the NASD
answer?
16
Published
connection with
Company
$24
a
21
Securities Salesman's Corner
1-1434
rate, during the pendency of
21
Securities
Railroad Securities
Washington
gave
any
42
Prospective Security Offerings
Public Utility
At
opinion the
In all this there was never any need for inference,
simple vote under NASD by-law would have been a
complete solution. Why wasn't it taken? Need we
23
Governments
York
resulting indignation might destroy them.
5
Wilfred May—■
Report
Our Reporter's
They
20
_•
briefing,
disclosure, to publish its office memoranda
12
———
News About Banks and Bankers
New
Coal
NET
our
proceeding, when challenged by counsel to dis¬
any
Editorially
14
Funds
Mutual
2-4930
Gauley Mountain
mem¬
in the actions of its side
SEC activity. In
Philosophy," the Commission
36
Business Activity
Indications of
above
close
QUOTED
14 Wall St., New York 5, N.Y.
always strongly suspected that the "5% Yard¬
yielded suppliantly.
the
-
considered
Price
direct product of
8
Dealer-Broker—Investment Recommendations
Einzig—"Britain's Views
a
SOLD
-
op¬
compel the NASD to declare the "5% Yard¬
Commission did the
7
Business Man's Bookshelf
Canadian Securities
Broadway
System Teletype N. Y, 1-714
Securities Dealers Committee which in¬
a
the SEC
course
kick. We have
Cover
(Editorial)
Y. Security Dealers Assn.
This the
rule and direct its submission to the NASD
a
Of
See It
request
on
REctor 2-4500—120
Regular Features
As We
Corp.*
J.K.Rice,Jr.&Co.
>
bership for approval.
21
Purchases
Bond
Dorset Fabrics
Capitol Records
proceeding before the Securities and Exchange
a
Commission to
20
_____——
Pfd.
&
Finishing Com. & Pfd.
Established 1908
The evasion certainly is
evidence
organization of
in Business
—
Regime's Policies Indicated——.'
"dis-
conclusively defeating this yardstick.
J. Howard Pew Says Industry's No. 1 Problem Is to Earn
Emerson
Com.
U. S.
yoke would fail of imposition.
resulted in
18
Enough for Capital Replacement
WHitehall 4-6551
^Prospectus
judgment any fair vote taken by the NASD would have
Railway Outlines Canadian Freight
Puzzle
Rate
"few,"
are
position to the 5% yardstick wide spread. In
18
(Boxed)
YORK
STREET, NEW
rule and under NASD by-laws should be sub¬
was a
We conducted
Walter E. Iloadley, Jr., Sees No Early Drop from Present
Business
members,
adoption of the by-law. No chances
an
extra
United Piece Dye Works
grounds,
belief that exercise of the franchise would have resulted in
<
16
___
— .
two
error on
when the NASD foisted the "5%
mitted to those members for
16
Stirling, Morris & Bousman to Continue in Business.
Belgian Bonds Drawn for Redemption.
its
upon
general approval.
Counteract
to
WALL
Telephone:
tunity to determine whether the proposed action met with
W. Randolph Burgess and George B. Roberts, of Committee
some
Tennessee Gas Trans. Co.*
^
Board of Governors refused to do.
S. Davis, Francis A. Triislow and Hans A. Widen-
Howlahd
mann
9
;
with
you
majority of the NASD members support the 5%
a
From the very outset
t
-Cover
First Boston Corp. Inaugurates New Plan for Distributing"
(Columbia Gas System)
■
philosophy, and that the opponents
gruntled" and "non-industry critics."
:;
Percent Yardstick (Editorial)
The Five
;
and
those obsoletes
us
Members N.
William C. Mullendore Scores Businessmen for Failure to
<
-■<
We believe the author to he in
of Government in Grain Market
Menace
few, disgruntled dissenters in the
a
v %
15
•_
furnish
us
sup¬
majority of Association members, have continued
a
didn't win that tiet on the
bring
let
by action of the Board
Since that time, the Governors,
non-industry critics and
Guide in Managing Life Insurance
as a
Portfolios—Thomas W.
25, 1943.
you
uphold the 5% philosophy, despite periodic sniping by
15 '.
.___
Oct.
on
if
Series,
99
established
General Practitioners in Liberty—Leonard E. Read__
__
But
cash.
/.
•
.
,
We quote
|
7
TAKES ALL
article
an
Markup Continues to Rule Over-
.
I
1-* 6
Harvey
THE WINNER
anachronism and should be revoked.
In the current issue of "Finance" is
4
—
_
never submitted to memIn view of present status of our economy, it is
vote.
a
an
Guide to Stock Price
as
AND COMPANY
;
.
Exaggerated Froth in Business Outlook—Alan H. Temple—
LlCHTEnSTEIf
"5% spread yardstick" approved by
majority of NASD members.
Recalls proceedings instituted by
Securities Dealers Committee.
Poll conducted by* "Chronicle"
Disputes
Depressed Markets for High-Grade Preferred Stocks
—Robert E.
B •'
News
Monthly,
Members New
(Foreign postage extra.}
Note—pn account of the fluctuations in
the rate of exchange,' remittances for for¬
eign .subscriptions and. advertisements must
be made in New York funds-. >-
York
Stock Exchange
25 Broad Street, New
York 4
York Gurb Exchange
C. E.
Unterberg & Co.
135 S. La Salle St., Chicago 3
Members
N.
Members New
Tel.: HAnover 2-4300
•'"(
'
,
Albany
•'
-
Tel.:
FINancial
2330
r
Teletype—NY 1-5
Boston
-
:
"Glens Falls
due 1948
i.-
Schenectady
-
Worcester
Y.
Security Dealers
61 Broadway, New York
Ass'n
6, N. Y.
Telephone BOwling Green 9-3565
Teletype NY 1-1666
Thursday, October 14, 1948
FINANCIAL CHRONICLE
&
COMMERCIAL
THE
(1536)
Earnings Versus Dividends
Business-Today and Tomorrow
By EDWIN G. NOURSE*
Chairman, Counsel of Economic
As Gnide to Stock Price
Advisers
By ALEX. M. HAMBURG
President's Ecjnomic Council as having objective of sustained
rather than blind struggle of special interest groups, Dr.
Nourse warns against accepting economic slogans, based on theoretical analogies such as "boom and
bust."
Says current conditions are better than after World War I and real test of our business sys¬
tem will not come until after 1949.
Foresees no permanent price adjustment if heavy military budget is
continued, but looks for statesmanship in all segments of our economy to foster a well sus-
After describing the Act setting up
high production under
integrated
an
—
,
I shall
1946
of
isfaction of the material wants of
and
their median level. It
we
out¬
brains
look must pro¬
ceed.
•
An
mw
der standing
the
.of;
functions
t h
e
to
As
Joint
mobilize
riddles
d-o
in
to
of
Edwin
is a
to
the means to be used
.
i
.
„
_
_
1
Gi Noursm
Employment Act does not propose
Congress
• :
any trick device.
It does not of¬
set. up in that Act is necessary fer any patent medicine or resort
prefatory matter to what I shall to magic—black magic, or white
say about the
general economic magic, or golden magic. I speak
process that will condition your advisedly when I say the Employ¬
ment Act merely commits us to
operations in the future.
I do not believe that the strik¬ "mobilize our economic brains to
the
the stock
tial
or
1947
Deration
i
n
ing and unprecedented declaration fashion practical measures" for
of national economic policy which giving people who want to work an
opens
the Employment Act is opportunity to do so all the time
mere verbiage which has been re¬
instead of part of the people part
pudiated by changes in American of the time. "Maximum employ¬
thinking that have taken place ment and maximum production"
within two short years. I believe demands
that this
employment
background of earnings. Over the
period from
1920
to
1939, the
proportion
of
cash
dividends
which were paid out of earnings
-of manufacturing companies was
stocks,
w:hen
ana¬
with
to
vorable
of
It is incum¬
to lead in the devel¬
opment of a technique for con¬
tinuous examination of the entire
functioning and dy¬
namic whole."
The Council has no
Our
authority
coming
administra¬
form
of
.
a
this condition, what
illustrate
To
has
our
In
cited. '
June
lion
30
U.
in
happened
the
Steel
S.
months
12
is
ended
last, it earned $125 mil¬
after
sizable
preciation and
charges for de¬
replacements. Al¬
though after the payment of divi¬
dends it had $109.6 millions left,
nevertheless
its
cash
or
other
liquid assets were reduced by $219
million.
To the extent that
require
capital needs
retention of earnings, it
argued those earnings
been
has
have
If
overstated.
been
divi¬
,
dividend
.
utilize all its plans, functions,
and
resources,
manner
Compare
corresponding
profits
$6.88
1948
billion, dividends
Corporate profits
quarter of
$18.07
billion.
the
through
second
rate
annual
the
at
are
of
$30.9 billion.
the
From
foregoing facts of a
ratio, some have
dividend
low
that
concluded
stock
common
prices will not favorably respond
future, and that divi¬
in the
near
dend
policy
be
cautious
The liquid¬
will
•
rather than generous.
ity factor will, of course, be one
of the controlling considerations..
There
various contemporary
are
.
and
creating
amounted to
this with
1947 figures:
payments
billion.
$3.79
the
and
.
,
period of years prior to
1946, the ratio of dividends to net
earnings was about two-thirds;
that is, only one-third of net in¬
it is the continuing policy the methods of scientific analysis the narrow or short-run advantage dends rather than earnings con¬
responsibility of the Federal and measurement to bear on the of particular interest groups, at stitute the dominant factor in de¬
Government
with the assist¬ framing of national economic pol¬ the expense 6f sustained national termining
stock
market value,
icies. The general approach, how¬ prosperity through balanced high then
a ^significant
ance and cooperation of industry,
change
has
agriculture, labor, and state and ever, consists of two phases. First, production. One of the duties as¬ taken place in the long estab¬
local governments, to coordinate a professional staff arm is pro¬ signed to us in the statute is "to lished relationship between earn¬
".
cash dividends.
as
Over
substantial increases in dividends.
responsibilities.
does not alter the
or
existing
that remarkable piece of legisla¬ shall be under conditions of high
frame of government.
We have
tion registered a definite step in efficiency and, if we are really to
not been endowed with power in
the progress of our system of pri¬ keep' the systdm humming on a
the executive branch of our gov¬
vate enterprise under truly rep¬ voluntary basisf the relationship
ernment, but as the institution
resentative government. If so, the of the market—prices, wages, and
grows in experience, wisdom, and
instrumentalities which it set up profits—must be equitable in their
prestige, it should wield an im¬
are themselves a vital part of the
broad outlines.
portant influence in coordinating
trends that will influence your
the Cabinet departments and in¬
business and your private fortunes
Problems in Framing Economic
dependent agencies in policies and
Policies
over the years ahead.
procedures that promote the na¬
The Declaration
of Policy in
Time does not permit me to go tional
welfare.
Our
analyses
Public Law 304 of the 79th Con¬ into detail as to what I believe is should challenge and deter parti¬
involved in this attempt to bring san programs designed to promote
gress affirms that:
Cabinet
out
Alex. M.
bent upon us
tive
recent
However,- in
fa¬
Hamburg:
("Barron's,"
Aug. 2, 1948,
p. 26.)
come
was
retained.
This ratio
Seeking an answer for the com¬ has recently declined and less than
paratively low price-earnings ra¬ one-half
of
available
earnings
tio now existing, it has been urged are distributed in cash dividends,
that huge sums must be used by
despite the tremendous increase
corporations to keep their physi¬ in business volume and profits. In
cal equipment abreast of demand;
1939, when corporate profits af¬
that such needs have prevented
ter taxes were
$5 billion, cash
policy and following his course of
action with reference to the na¬
economy as a
was 60%
companies.
years under
average
merchandising
50% of net income has been paid
i ngs.
ear n
75%; the
over
for
trend
the
pay^
(amounting to $6.8 billion)
historically high against the
are
figures-
g s
steel
responsibility of this agency
for his consideration
the materials which should be of
most use to him in laying out his
dividend
total
ments
earn-
for the oil and
process
The figures for the year
show
earnings. Cor-,
through-, professional- thic atfAnnv
eyes.. It is
-fVio
the rAcnAncihiliTxr nf
...
surprising extent, substan-
shares.
year
-
writer has pointed out
one
,<£-
increases
in half
lyzed, indicate th(at the value
United States may see the eco¬ placed by the
nomic situation and problems oi market o 11
the nation in their entirety and such stocks
is, not, in. line ,
economy.
Thus,
that stock market prices have ignored, to a
every
tional
'
,
much does
pay?" has replaced "How much does it earn?" as a guide
to the value of an investment stock.
at the President's elbow to give
him smart answers to economic
our
universally desired-end, the
this
i
Committee
mean
disregard of historically high earnings 1
only temporary.
Recently the assertion has been expressed that "How
fashion measures—pre-
A healthy v economy
high-production economy.
Economic
Advisers -and,
f
of
Declares not dividend policy, but underlying
inflation explain stock price movements.
is
to tell him just what to
economic crisis or
stabilizing situation as it arises.' Now I do
meant that not regard myself as 333/3 % of the
cycle.;
vof the Council
o
like
forces
Concludes market's present
economic Three Wise Men. As I understand
the matter, we have (during oui
ventive so far as^possible, reme- term of office, however long 01
dial when necessary—to combat short) been entrusted with the task
the century-old disease of modern of organizing an agency through
which the Chief Executive of the
capitalism;: the so-called- business
should
the
,
the'past
in
tered
in which anal¬
.
not
merely smoothing out such highs
and lows as have been encoun-
against which
or: atmosphere'
of
did
This
nation.
the
part of the
background
business
undistributed profits.
economic
—
®
is
essential
ysis
Hamburg points out benefit to stockholders from pioughing-back of
"get-acquainted" remarks designed to give you as briefly as
interpretation of the character of the agency I represent and of the purposes
was established.
This is done for the specific reason that the Employment
my
for which it
Act
Citing fail in proportion of earnings paid out in dividends, Mr.
begin with a few
possible
an
Federal Taxation
tained structure of activity and income.
.
New School Symposium 011
Member New York Bar; Chairman,
program
for the purpose of
and maintaining, in a
calculated to foster and
promote free competitive enter¬
prise and the general welfare,
conditions under which there will
be
afforded useful employment
the Executive
in
vided
the
Office of appraise the various programs and
in pre¬ activities of the Federal Govern¬
ings
President, to serve him
policy de¬
paring each year an integrated
economic program to submit to clared in section 2 [the Declara¬
the Congress and in subsequently tion of Policy] for the purpose of
revising or elaborating this pro¬ determining the extent to which
ment in the light of the
gram as
occasion1 requires. To
this
end, there is set up a three-man
Council of Economic Advisers to¬
the.y are contributing, and the
extent to which they are not con¬
and dividends.
that dividends play
Conceding
a
part and
constitute one of the
"factors in the
of
valuation of shares,
stock, the present writer doubts
it is the over-all deci¬
whether
sive
His position is that
factor.
conditions which may make man¬
cautious about dividend
— inflationary and de¬
pressures, uncertainties
making equity financing difficult,
agement
payments
flationary
far
rates
tax
beyond
pre-war
standards, a large slice of apparent
profits reflecting merely the high¬
er
prices of replacing inventory,
and the need for adequate depre¬
ciation
based
allowances
re¬
on
earnings are the chief determinant
placement cost of plant and equip¬
tributing, to the achievement of of
including self-em¬
stock
value.
They
reflect
ment.
ployment, for those able, willing, gether with a small but high- such policy, and to make recom¬ normal earning capacity and thus
It is paradoxical, but neverthe¬
staff of broadly trained mendations to the President with are an index of value, that is, of
and seeking to work, and to pro¬ caliber
less true, that stocks of conserva¬
We utilize the fact- respect thereto."
mote maximum employment, pro¬ economists.
intrinsic,
basic
value
as
dis¬
tive companies retaining a major
duction, and purchasing power." gathering resources of all branches
Joint Committee on the Economic tinguished from shifting tempo¬
portion of their earnings sell at
government and of private
The great objective of the Em¬ of
rary market prices.
opportunities,
.
ployment Act was to
able
structures
end
that
sustained
devise suit¬ agencies, and
we
confer periodic
governmental cally with consultative commit¬
and procedures to the tees representing management, la¬
we
might have better bor, agriculture, consumers, and
state and local government.
business
use
manpower,
and
of natural resources,
and capital
in the sat-
Report
relatively high market prices,
implementa¬
tion of the Employment Act of
1946 is on the legislative side and
takes the form of a Joint Com¬
The second line of
addressing the American Eco¬ mittee on the Economic Report of
Association in 1947, I de¬ the President.
This
committee
scribed our role as follows:
In
nomic
*An address by Dr. Nourse at
"Some cynical people have al¬
meeting of the American Transit
\ssociation. Atlantic City, N. J., luded to the Council as 'the Three
(Continued
on page
39)
Proportion
of Earnings Paid Out
Dividends
in
It
the
that
.
cash amounts of dividends—
is
that portion
earnings
riodically
of
which have
distributed
corporate
been pe¬
on
their
i
Wise Men of
sept. 27, 1948.
TRANSGULF
Colorado Milling
Texas Gas Trans*
Oil Corporation
—
Sold
—
Common stock selling
under $2
Quoted
of
worth,
are
that the current
dividends
will
continue
permanently into the foreseeable
future.
This is obviously unreal¬
our
ever-fluctuating
framework
many
eco¬
factors
example.
Distributions of liberal cash divito
dens
under
Goodbody & Co.
L. D. Sherman & Co.
Exchange and Other Principal Exchnnees
105 West Adams St., Chicago
115 Broadway, New York
net
book
obtain
credits
tax
or
to
prevent the imposition of surtax
Members N. Y. Stock
Telephone BArclay 7-0100
as
The income tax is a good
♦Prospectus on Request
Bought
well
not
impede continuity and regularity.
A Producing
Struthers Wells Corp.
Crowell-Collier Pub.
as
are
components properly included in
the value
equation.
It is only
nomic
^Ideal Cement Co.
& Elev.
lost,' but are
ploughed back to build up equity
value.
The steady income yield,
istic. In
corporation
undistributed
the
that
earnings
rate
Georgia-Pacific Plywood*
Cleveland-Cliffs Iron Co.
It is essential to re¬
ties market.
member
in
securi¬
competitive
intensely
human to assume
Economics,' standing
.1
Central III: Pub. Serv.
>
extent of
is well to note the
an
Teletype NY
1-672
,
30
Pine
Street
Telephone WHitehall 4-5550
New
York 5,
N. Y.
Teletype NY 1-2233
false
Section
This section
for
102
appearance
provides
unreasonable
of earned
may
of
a
create
a
prosperity.
penalty tax
accumulations
surplus, and is intended
(Continued
on page
35)
Volume
168
Number 4742
COMMERCIAL & FINANCIAL
THE
CHRONICLE
(1537)
■
•
•
'
'
'
■
<
'
(
State of Trade
In
tional
was
.
anticipation of
and
y
presumed ordering of a change in our na¬
a
Administration at
the
the investor.
investing community's status at
estimating the nature and extent
innovations as they may affect
Our conclusion
pinning his hopes
on
was
that in lieu of
major permanent relief from
the. existing trends in regulation,
.
..
discriminatory
taxation, and socialization which have been undermining his position in the community," the in^ vestor should be spurred to, exerting the maxi¬
mum
effort in pursuing sound policies in the
management of his capital.
The basic
principle
"
we
;
would recommend is
of realism in avoiding wishful thinking that
inflation can be taken advantage of, and capital
profitably employed, by; forecasting "the market."
Iiisteadj the indiyiduars broad" portfolio policy,
well as every decision with regard to specific
security transactions, must be justified on "hard-
as
boiled"
A. Wilfred May
lines-
of; justifiably
expected
return.
Without
quibbling, about the definition of invest¬
ment and speculation, and the difference between
them (which is mainly constituted by subjective motivation and in¬
definite gradations), let us consider what should actually bev the
businesslike purpose of the owner of capital.
Lewis, United Mine Workers President, again came into
prominence the past week after his encounter with the
Federal Court last spring.
At that time, both the United Mine Work¬
ers Union and its head were held in Contempt for violation of a court
injunction which the government obtained' to»prevent the miners
from striking over • what Lewis chose to call>' a dishonored pension
agreement on the mine owners part. :'rf4/Pv
'
The general pattern of the. Uhited MinevWbrkers' 1949 contract
demands will be outlined this week at- concluding sessions of the
union's 40th biennial convention.
To begin with, on Wednesday of
last week, Lewis proposed to the convention that it approve a 100%
increase in dues for the miners to strengthen their financial position
•"
possible
new
economic struggles. He further stated that the union
is seeking to have the age limit for retirement under the union's
welfare fund reduced from 62 years to 60 years and that, with the
seven-hour
His basic aim is'to buy his shares in
property at a price which
will yield him sufficient regular income to give him (1) the riskless
rental value of his capital plus (2) risk-premium sufficient to amor¬
a
Chairman
of
one
of
the
largest pri¬
vate banks in
Gorman y
prior
to 1933
and a resident.
:>f the United
•
John L.
peak of postwar coal demand apparently past, a reinstallation of the
Basic Investment Aim 4
/:
capitals.
Dr. Hahn,
Industrial production for the country at large increased moder¬
ately last week and exceeded the output of the similar period Of 194,7.;
In keeping with the higher tempo of operations, industrial back-order
volume for the week registered a small decline. :
On the labor front, disturbances were not; as numerous as in the
preceding week, but the oil refinery and shipping strikes in the
Pacific Coast region continued to hamper industrial activity in that
for
visit
to Europe an
J
area.,
four-
a
months'
-
national
.one
\
-
Line's
Grasse
from
Business Failures
polls next month, last week's column
devoted to stock-taking of the
the end of the New Deal era, and to
of post-election
the
De
Auto Production
Industry
Oct.
French
Commodity Price Index
econ¬
on
aboard
9
Retail Trade
Food Price Index
POST-ELECTION INVESTING PRINCIPLES
'
Albert Hahn, noted
Dr. L.
omist and author returned
Carloadings
....
By A. WILFRED MAY
Production
Electric-Output
•
1
1
Dr. Hahn Back in N. Y.
i
4
Steel
The
5
day, 35-hour week is an economic necessity.
While the union does not contemplate a serious depression in
coal in the near future, it is not overlooking the possibility; hence
the emphasis on a return to the seven-hour day with; of course, no
drop in the weekly take-home pay of the miners contemplated.
..,,
.
States
Photo: H. S. Jtvbien
book
called
Illusion,"
since
1940, is work¬
ing on a neW
Dr. L. Albert Hahn
"The
Economics
of
critical analysis of the
policies advocated by
the late J.
M. Keynes, famous
English economist.
The
Squire
a
monetary
Publishing
Co.
Hahn's
book in
new
publish
will
Dr,
Mid-January.
It will be distributed by
the New
York Institute of Finance.
Harry B. Spring Joins
Ungerleider & Co. ;
Ungerleider & Co., 41 Broad¬
protection not afforded
way, New York City, members of
by the realizable assets, plus (3) especially in case of an equity, an
increment for safety and ultimate profit. This basic test would apply
;
Total employment dropped in September for the second consecu¬
to practically all forms of investment, real estate as well as securities.
"In the case of bonds, the-simplest decision is that surrounding tive month, the Census Bureau reported. It slid off 933,000 to a total
government issues. Their yield being the riskless rental value of our of 60,312,000, but according to the Bureau, the loss was not significant
:
money, and our principal being risklessly repayable in dollars at since ft comprised in the, main, students, holding summer jobs.
Actually, more job holders Were at work in September than in
maturity (or before from the Savings Bonds), our only decision to
make is whether we wish to rent our dollars put risklessly at the August, the Bureau reveals, placing the. total civilian force at 57,going rate; whether we believe that some other bonds or equities are 676,000, or 1,074,000 more than in August. .There were, in addition,
available at prices which afford adequate compensation for the degree
1,366,000 drawing pay from the armed forces.
Vf -XX*) ■.] !i! :
of risk respectively involved; or whether we prefer some other kind Xf-:
*
vi-v X xj'-'- V:'XXv\X'-,"
of investment.
Personal income continued its upward swing in August, reaching
; '.*.V /
'♦•r-'-V/'V---'-.":v:;V'-V-''.
When considering corporate bonds, we are really confronted with an annual rate of $215,100,000,000 from $212,900,000,000 in July.
the question whether the additional income available from relatively
This record high in personal income—or the amount individuals
low-grade issues will average out, over a reasonably long period, as receive in Wages, rents, dividends ;• and interest—reflects the, third
round of wage increases, the Commerce Department said.
large enough to compensate for actual losses likely to be incurred
A similar
by reason of the greater risk. Can foreseeably the difference between increase in personal income that occurred about the like month last
Harry B. Spring
the riskless annual rental value of 2J/2% and the return of say 5*/2%
year caused the upward trend at that time, the department added.
from BA grade bonds, over a 10-20 year period compensate for
Expansion in employment was also given as a reason for the rise
losses suffered in those cases where default in principal or interest Personal income for the first eight months of 1948 was at an annual the New York Stock Exchange,
occurs? Such reasoning follows our above-stated principles of soundly rate of $209,700,000,000, compared to $190,700,000,000 during the sim¬ announce that
Harry B. Spring
creating an insurance fund for losses through the storing-up of ilar period last year and a 1947 full-year total of $195,200„000.
has become associated with them
annual risk premium (even if
only via mental bookkeeping).
as
manager of their investment
Stimulated by cooler weather, consumer buying in the week rose
Each Issue on Its Own Merits
slightly above the level of a week ago and continued moderately department. Mr. Spring was for¬
Experience as well as various studies (such as that made last above that of the
corresponding period of last year.
Consumer merly a partner in Greene & Co.
year at the School of Business Administration at the University of 'interest in fall
and winter apparel increased noticeably.
Meats and
Oregon) shows that no hard-and-fast overall conclusions about the some canned products sold well in
many localities.
The retail volume
comparative attractiveness of the various grades of corporate bonds of furniture and hardware Was
generally sustained at a high level.
are justified.
^
The investing public has a prejudice in favor of the
Wholesale volume slightly exceeded that of the preceding week
low-coupon, lower-priced bond, and generally over-discounts its and of the comparable week a year ago.
Re-orders of women's
actual real advantages by relatively over-pricing it in the market
seasonal merchandise continued in large volume with new orders for
(cf. "Basic Yields of Bonds 1926-47; Their Measurement and Pattern,"
holiday items showing a moderate increase.
Trading volume in
by Durand Winn, National Bureau of Economic Research, December cotton and wool textiles remained at a low level.
1947). Hence, in the case Of bonds, just as with all types of securities,
we
should not follow generalizations about whole
categories, but steel output scheduled at highest rate since
Int'l Petroleum Co., Ltd.
appraise each individual issue on its own merits.
:
mid-war period
"xxxxSuch technique of scrutinizing each individual issue is particu¬
Because the steel industry would rather have voluntary alloca¬
larly indispensable in common stock investment. If we concentrate
tions than imposed government allocations, it will struggle along as
Standard Oil of N. J.
on thus meeting the requirements
of capital rental value plus risk best it can, states "The Iron Age," national metalworking weekly in
premium, instead of on the traditionally vague unreasoned concepts of its latest summary of the steel trade. The present law on voluntary
the price-earnings ratio, we can supplant the current haphazard allocations
expires next February. Steel people have promised to
guessing about the ratio's size with a logical and businesslike ap¬ take care of defense needs and maybe a few "must" programs after
proach.
•.
that time.
■,
In recognizing the importance of concentrating on the value of
52 WILLIAM ST., N. Y. 5
HAnover 2-0980
What steel officials are beginning to have to contend with is the
the property he is buying or selling, the logical investor will
Bell Teletype NY 1-395
forego ever
increasing number of orders coming under a plan which Was
the investment community's habitual behavior of
New York
Montreal
Toronto
betting-on-thedesigned to take care of "essentials." So much has the plan mush¬
news, or rather from betting on the way other people will react
roomed that output of some products is 25% to 35% allocated. Steel
to the anticipated news.
Particularly under current conditions of
people are not in accord with the plan but if it is extended there is
extreme political and economic complexity, is it fruitless to conduct
little the.y can do except go along under private protest.
one's
tize the
investment
in
correlation, with the
•
,
-
HART SMITH & CO.
...
,
investment behavior
as if in a game of musical chairs wherein
loser is unfortunately squeezed out at the end; or to try either
to follow or outguess "the crowd" on coming styles of the market or
of its individual stocks; or to psychoanalyze one's fellow-investors
some
instead of
The
reason
why the allocation program has outgrown its effec¬
As each new group was
tiveness is simple, the trade paper observes.
(Continued
on page
Royal Bank of Scotland
Incorporated by Royal Charter 1727
'•X-xXxX.
29)
analyzing the securities.
HEAD OFFICE—Edinburgh
Branches
Exploitation of Public's Errors Constitutes Sound Investing Tool
•
-This, is not: to minimize careful observance of the psychological
attributes of the market "community as an extremely valuable auxil¬
iary took The emotional foibles of the crowd regarding the market
in general, as exhibited in its manic over-enthusiasm at the
top of
bull markets and its converse extreme mental depression at the
.
bottom" of
bear
markets,
proper climate of one's
extremely helpful
conseryatism.
are
own
in indicating
For
]
-
•
example, one's findings that
on
•
the
"X-'i
value tests the general
-
mar-
ket is qyerpriced, are justifiably reinforced rifvit is learned that the
bUyingr is beihgydone;by.*a.public excited over bobimng:industry and
Withoutregard,touvalues.. CqnyerSelyy-one's^ apprkisal^of the
(Continued
page35)
on
♦
or
w
*
wtm
r.
•
8
McGraw (F. H.) & Co.
l888
a »•.v-
/
:vX"
•
-
"Associated Banks:
V
"
£153,656,75fr
.
V
"
ASSOCIATION X.
W. 1
TOTAL ASSETS
:
-
Estabh"shed
Cross, S. W. 1
64 New Bond Street,
FREDERIC H. NATCH 1 CO., NIC.
MEMBERS N. Y. SECURITY DEALERS
West Smithfield, E. C. 1
Burlington Gardens, W. 1
Bought"—Sold-—Quoted
"<?
OFFICES:
Bishopsgate, E. C. 2
49 Charing
Universal Match Corp.
Moreover one's detecting that either over- or under-valuation of
the general market, of groups, or of individual
securities, is theresult of a.
misc6ncepj;ibri by the public, constitutes one of the most
effective tpolsi fpr supporting bne's own investment "decisions.
3
Kingan & Co.
throughout Scotland
LONDON
-
-
■
Glyn
Milla. &
Co.,
- -
'
Williams Deacon's Bank, Ltd.
63 Wail
Street, New York S, N. Y,
Bell
Teletyp*NYl-8»7..
.a.
v.
*
6
&
COMMERCIAL
THE
(1538)
FINANCIAL
Problems in Federal Debt Management
CHRONICLE
||
By FALKNER €. BROACH*
Vice-President, National Bank of Tulsa, Tulsa, Okla.
Foe of Socialism and Communism
^
Pointing out large bank holdings of/government securities and resulting increase in bank deposits have
become permanent features of banking, Midwestern banlt executive sees only limited possibilities of
shifting bank held debt to non-bank investors. Upholds Treasury support of government bonds as
essential, and contends problem is fixing level of support that will serve economy best and prevent undue
inflation or deflation. Contends short-term rates can be increased further only slightly without jeopard¬
Hits insurance
izing stability of long-term bonds.
I should like to discuss with you
our national
will deny. How
managing
no one
for
By J. ALLEN HARVEY
Partner, A. G. Edwards &
Sons, St. Louis, Mo.,
Members of New York Stock Exchange
Mr. Harvey, commenting
by corporations, proposes
growing scarcity of equity financing
remedy—a "fifth" freedom, the right
of ^individual ownership—be added as foundation for other
four
bond selling.
company
debt of some $250 billion. That there are problems involved I think
these problems are solved will do much to mold the future of our
economy in
general,
in
no
sphere of
our
—
solution
•problems
likely to play
dp ring
im-
a
portant
in
our
ing.
We
one
credited
and
war
your
Account;-when your bank
bought bonds you debited your
frozen into
commercial bahk-
our
already in the
authority
'given
the
Falkner C. Broach
discounts,
shifting
bank-held
debt to non-bank investors oriby
by
Treasury retirement of. bank-held
$98 billion at the end of 1945 and
deposits, just
account to another; but when
one
bank bought bonds your de-
Federal Reserve Board at the last
your
session
posiis
the
Congress to raise
member
bank
reserve
require¬
ments— an authority which the
Board has exercised in part al¬
ready:
The suggestion also has
transfer from
a
increased—manufac¬
were
so
to
tured.
speak, out of your
own
purchases.
Of. course the
Treasury
made
periodic with¬
drawals from your War Loan Ac¬
been made that a national mone¬ count, but did you lose deposits?
Directly or indirectly you
tary commission be created to re- No.
enough
government
appraise our whole system of re- received
serve banking.
We know also that checks for deposit—from G. I.'s
the yield on governmental securi¬ their dependents, war contractors,
ties tends tb set the whole pattern or defense workers—to offset you'r
of rates throughout our economy. War Loan withdrawals. On bal¬
"Thus I think it is obvious that the ance you;actually gained deposits
ing of
our cor-
porate
out
debt
pluses.
demand
billion
deposits from nearly $108
as
of the
date to the
same
present level of about $74 billion
and
$91 billion, respectively!' I
think
must
we
outlook
recognize that the
the
for
is
future
consid¬
erably less encouraging. The de¬
creases in deposits and bgnk-held
debt since the 1945 year end were
made
of
the
possible primarily by - use
Treasury's' enormous cash
balances at the end of the war:and
of
<*)
.
form
comes
in
tration of this
credited
and
After reading numerous
speeches made recently before The As¬
sociation of Stock Exchange
Firms, The American Bankers' Associa¬
tion and other financial
organizations, the .theme song of which had
to do with the growing
scarcity of capital available for equity financ¬
the
of Treasury cash sur¬
Although progress has
been made in bringing bank-held
debt down from a peak of, nearly
account
investment
..
duced
only, by a contraction j of
credit—i.e., by reducing loans and
a
a
widespread propaganda movement be under¬
taken by commercial, financial and labor
organizations to encourage
individual investment in stocks of American business
corporations.
by which either can be Re¬
duced.
The deposits can be de¬
ways
your War Loan Account. In the
first instance there was no change
illus¬
of
customers
your
Loan
have
■seen
loan
war
bonds you-charged their
accounts
mercial bank¬
;
When
bought
com¬
.
the; various
drives.
role
more
;
V.
deposits and bank holdings
government
securities
are
of
.v
mentary, let me remind you of
what happened in your own bank
these
of
bank
.v;-:";.v. ',■> -■ ing system and therefore into Our
At the risk of being quite ele¬
economy.
In fact, there are few"
ties.
is
economy
the
additional deposits and
money equal in amount to their
purchases of Government securi¬
speak
but
single
on
freedoms and that
few moments some of the problems involved in
a
Thursday, October 14; 1948
industry,
and
feeling
this
broker
and
whole
ing
the
by
hear
we
about
have become over-devel¬
we
oped within
is
stymied
are
restrictions
many
that
problem'
W-
,,
Admittedly, the investment banker
to
our
solve
shell in try¬
own
them.
An
appeal
influential
being ';a pproached from
should
be
persons
to
t jn e
there any reason why such organ¬
izations
as
the
United
States
w r o n
angle.
these
tions
by
g
All of
sugges¬
Chamber
read
are
est
a
great
inter¬
Association
nies
with
and
favorable
actions.
of
Is
Commerce, with
all
throughout the country, the
ABA, the NAM and the National
of
deal
other,^organizations.
bers
people
many
with
by
of the different Commerce Cham¬
great
a
made
Joshua
Allen
Harvey
not
whose
re¬
Everyone knows that the
stockholder's
of
Insurance Compa¬
(life, fire and casualty ) should
have
important committees
express
soring
is
purpose
ownership
of
spon¬
common
position would be; stocks? You may also include such
we eliminate the , organizations as the CIO and the
improved should
double
should
tax
and
change the capital gains
we
tax both
dividends
on
as
to rules
governing the
time element l'or
A. F. of L.
Its membership should
encouraged to own common
be
stocks
of corporations, especially
by whom they are em¬
to retire bank-Jield debt.
Treasury's working balance
years
The
of
centage
long and shortgains and the peramount of tax charged
against
Treasury cash surpluses of recent
these
lions depends upon the successful
term
capital
gains
everyone
those
ployed.
bership
The welfare of the
of all
these
of
mem-
organiza-
—deposits which your bank, or some will permit of little' further.debt
bank, had created through retirement and while I do not knows that there is an incessant continuance and operation of our
the
purchase
of
Government agree with Mr. Truman's forecast attack from cheap political sources corporate form of economy.
It
All you needed6 were for the 1948/49 fiscal year, I think against the misnomer
"Wall jreases to be if not financed from
System of commercial ban-king. It securities.
is along these lines that I should sufficient reserves at the Federal we must admit thatthe prospects Street."
Everyone knows thc^t a the bottom* up through equity capnnfinviftl
virnntnfMit
hp
ifn
rnnroeontor)
htr
nrnhri-o,!
nnrl
shouldbe ita represented by preferred and
like to talk to you for a few md- Reserve Bank to support the. in¬ for retirement of'bank-h^ld' debt national environment «VirmlrJ
creased
ments.
'
<
4
deposits and these re¬ during this and' subsequent fiscal created wherein management, la¬ common stock.
There is where
bor and agriculture can work in ownershio
At the outset I think we should serves were made available to you years is limited.
begins. Continuous
recognize that measured by pre¬ by open market operations of the
This
leaves
for
consideration harmony for the common good, pressure shoud be placed upon
war
standards
our
commercial Federal Reserve Banks. Through
the possibility of shifting bank- Everyone knows that investment these organizations to help sponbanking system has undergone its open market operations—i.e., held debt to non-bank investors. banking and the investment bro- ror a broadening of the base of
certain revolutionary changes through purchases of Government
Here again the possibilities are kerage business has been strait- ownership of our corporate capidirectly attributable to the policies securities in the open market—the limited.
i i its operations since talistic form of industry. Then you
In fact, the shifting of jacketed
followed in financing World War Federal Reserve Banks furnished
the passage of the Securities Act I will cease to hear what seems to
non-bank held debt back to the
II. I have reference to the enor¬ the commercial banks the neces¬
in 1934. After studying this prob¬ be eternal, the term "tools of Wall
Federal Reserve Banks is one; of
mous
increase
in
deposits and sary reserves to support their in¬ the
Street."
The investment banking
major problems confronting lem, the first question that comes
bank holdings of government se¬
creased deposits.
With each $1 the
to the fore is this:
business and the investment bro¬
monetary authorities today.
million purchase of securities by
curities, neither of which is a
It has been the selling by nonWhat can be done about it and kerage business need help in pop¬
the Federal Reserve System mem¬
temporary condition.
ularizing the most common form
bank investors that has necessi¬ how?
management of vour national debt
is to play an important role in our
economy in general ■ and in our
—
other
.
.
ber bank
,
Credit in War Financing
Bank
lion increase in
Although it was the announced
policy of the Treasury to finance
World War II with
minimum
ties
by
on bank
credit, the Treas¬
did look to the banking sys¬
.supply
the
system
creases
as
the
banking
necessary
government
supply these
terms and
to permit the
II
the
to
re¬
support the deposit in¬
resulting from bank pur¬
of
to
War
was
within
in
such
%%-2V2%
posits
on
of
com¬
mercial
banks, the Federal Re¬
Banks and the Treasury was
highest. The necessary re¬
the
were
in
in
both
Federal
and
an
was
bank
de¬
commercial
Reserve
Bank
billion
$36
and
holdings of
gov¬
i; underwriters of the various
loan drives by open market
as
an
war
ability
chases and by direct
subscription
for those issues which
they were
of
such
a
the
amount
enormous
create
process
pur¬
or
and
in
the
manufacture
large amount of additional
deposits
an
increase in Federal Reserve Bank
their
credit,
—
or
manufactured,
so
se¬
purchases
'
*An address by Mr. Broach be¬
Louisville,
Ky., Oct. 5, 1948.
principally
of
open
government
market
securi¬
ties, of about $20 billion.
to
fore the Kentucky Bankers Asso¬
ciation
Convention,
a
of
appraisal
recog¬
considerable
very
increase
ment
to
mean
the
to
in
bank
de¬
apply this state¬
individual
bank
but
to the
It
banking system as a whole.
follows, also, that as long as the
stand
Banks
Reserve
ready to buy, and do buy, the gov¬
sale for
Frozen
It
very
is
Into
my
Banking
which there
contention
considerable
enormous
wartime
that
to
extent
increase
a
in
no
other
the possibilities for fur¬
deposit increases are almost
unlimited and that in the crea¬
tion
of
is
deposits
new
added
Mr.
to
the
additional
inflationary
Parkinson, President of
Equitable
Life,
taken
Federal Reserve
the
have
others
and
to task for their policy of
Board
support
of the government securities mar¬
ket and per se there is no deny¬
that
in
government
buying
securities in the open
for a,
in
are
bank
credit
come
market the
paving the
roughly, five to
and
one
way
increase
deposits.
I
back to Mr. Parkin¬
son
the
are
for
ther
plan to
System
offered
securities
ernment
Reserve Banks
curities and by so doing they cre¬
ated
I do not
ing
made possible by
was
permitted to purchase on original
issue, thus adding substantially to
holdings of government
sup¬
and means of
ownership of the re¬
When the powers brought to
sources of our
country.
Broaden
light the four freedoms, the most
this ownership and you will have
.important one, the fifth, was not a
people's capitalism that will fur¬
mentioned—the very foundation
nish equity financing for the /re¬
of the other four—the right of in¬
sources of our country from the
dividual ownership. When a man
bottom
up,
creating a national
owns something he usually is able
force that would be able to
whip
to speak as he pleases;, he usually
any form of national Socialism or
worships, as he pleases; he does
Communism, all of which are built
■not want, and this in itself frees
from the top down.
posits and bank holdings of gov¬ him from fear. Other than private
ernment securities are pretty well
ownership of agricultural interest
frozen into
the
banking system and homes (and these in many in¬
and into our economy in general.
stances
are
assuming the body
fire.
through
served
the
extent
fuel
banks to increase their investment
in government Securities by such
banks
Irank
a
nize that to
billion.
The
commercial
on
the facts I think we, must
commercial
$29 billion to about $64%
Reserve
banks, by the Federal
Banks, principally
open market purchases;
Reserve's
buyers
ernment securities from j ust under
made available to the
Federal
Federal
commercial
the
Based
on
billion to $91 billion, time deposits
from nearly $16 biliion to nearly
of
serve
serves
increase
the
tated
port of, the long-term market and
indirectly, I think, the authority
granted and subsequently exer¬
cised, in part, to increase member
bank reserve requirements.
holdings of government securities.
Between Dec. 31, 1941 and
June,
30, 1948, commercial bank de¬
mand deposits increased from $44
rates.
The cooperation between the
based
and
bank
amounts
framework
pattern
deposits
was
The net of this process
financing of World
the
their
like amount. It
enormous
securities
reserves
mem¬
through
the avail¬
ability of reserves, that the bank
ing system was able to absorb all
of the securities not purchased by
other investors, and as a by-prod¬
uct of the process, to create or
manufacture an equal amount of
deposits.
to
chases
such
commercial
with
serves
and
Banks
increase
and
a
this process,
war
loan drives and to take the gov¬
ernment securities not taken
by
nonbank investors. The role of the
Reserve
the
reserves
were able to buy about
$5 million of government securi¬
ury
Federal
increased
were
ber banks
re¬
liance
tem to underwrite the various
reserves
$1 million and with each $1 mil-
later, but let
the
justification
us
or
first consider
lack of justi¬
fication of the support policies be-
(Continued
on page
26);,,■■■
Bonds of French Republic
Drawn for
corporate) there exists today only
one
kind of
furnishes
tribution
country
the
of
—
wealth
the
of
corporations
our
backbone
very
individual
distribution and re-dis-
of
means
the
to
of
our
the
—
national
our
It is through their pay¬
rolls and widespread public own¬
ership of their common stocks
economy.
that
a
ownership in
common
be
can
resources
and
agement
something in
could be
effected.
labor
should
own
and
what
simple than
own¬
common,
more
our
Man¬
ership of common stocks of
our
But how to
rub.
of
for
larizing
stocks
the purpose
own¬
is
members
through
of
the
engaged in
creating
and
equity "capital of
an
of popu¬
appeal to the
various
the
associa¬
business
distributing
our
Redemption
Morgan
of
the
corporations.
&
Co.
Incorpo¬
rated, as sinking fund adminis¬
trators, today (Oct. 14) are noti¬
fying holders of the Government
of
the
French
Republic External
Loan of 1924 25-year
bonis
7% gold
issued
sinking fund
due Dec. 1,
loan contract
under
1949,
dated
Nov. 22, 1924, that $3,981,100 prin¬
cipal amount of these bonds have
been drawn by lot for
Dec.
on
drawn
and
at
1,
1948
bonds
paid
on
at
will
redemption
105%.
be
The
redeemed
and after the redemp¬
date, in United States dollars,
the office of
the administrators,
stock ownership
common
has been
tions
popularize the
common
So far it seems that the road
chosen
P.
tion
corporations?
ership
J.
organization which
an
New
York
the sinking fund
23
City,
Wall
Street,
subject
the
to
provisions of Executive Order No.
8389,
amended,
as
tion
and
and
of
all
maturing
date.
drawn
presenta¬
upon
surrender
of
the
appurtenant
after
Interest
bonds
the
will
after
bonds
coupons
redemption
cease
Dec.
on
1,
.the
1948.
""Volume 168"
Number 4742
THE
COMMERCIAL
&
Remove
From
Washington J
Ahead
of the News
-
FINANCIAL" CHRONICLE
Pegs
By
(1539)
7
Government Bonds!
on
THOMAS
PARKINSON *
I.
President, Equitable Life Assurance Society of U. S.
Mr. Parkinson asserts present
By CARLISLE BARGERON
"camouflaged
use
of the printing press" by government constitutes
tial destruction of claims of holders of
savings bonds,
States inflationary supply of money, rather than its use,
f
par¬
insurance policies, and social security benefits,
is crucial.
Criticizes superficial attitude shown
in recent Congressional hearings on inflation. Pleads for Monetary Commission.
bidding lor the South¬ ;
erners' votes as champions of States Rights is
burning up the Truman- i
Without the usual formalities,
your speaker will attempt, for a few moments, to direct
ittes and those Southern Democratic politicians who are
trying to
your attention to a few problems that interest us all, I think, and that are of importance to
maintain their party regularity.
States Rights have long had their
the entire citizenry of the country.
strongest^
Perhaps, under the circumstances, it is not inapproThe
in which the Republicans are
manner
found
of
t i
a
the
in
-
o n
South,
course.
Down
over
the years
they
have been
the
t heme
of
much
old-
fashioned
waving
world
the
to
this
likely
the
be
last
attribute
the
never
high
e x-
.
pected to hear
it
is
due
the
to
chorus
their
taken
by
and. Wallace
chorus
filers
taken
Insofar
accents.
rank
death.
to
and
they
the
concerned,
are
tickled
over
as
are
Democratic
The
leaders sticking to party regular¬
and
having almost as much
trouble as they did in the Smithity
Hoover
campaign
,1928
of
are
burned up,
\
Privately, they
for getting them
they
scorn
damn Truman
into the mess
in;, publicly
are
they heap
the Republicans as so
upon
This is because
have generally
anti-lynching legisla¬
many hypocrites.
the
Republicans
supported
tion and because they have been
...bragging in an effort to get the
Negro vote of the East and Mid¬
dle West that they have enacted
such
racial
legislation
as
the
FEPC.;
;■
^ Jhe 'Southern politicians
invariably
opposed
lynching legislation
the
FEPC.
Now,
that
is going to
in
the
Tru¬
order
analysis
my
is
long-time. To have both ma¬
jor political parties shaping their
policy with a view to these minor¬
ity groups and leaving the great
inarticulate
of
mass
just
plain
Americans out of their thinking is
not
only downright disgusting but
downright dangerous. Already it
has brought plenty of grief to the
country and it would, if pursued,
bring plenty more.
Business Man's
Bookshelf
American
the
anti- j pr0blems
well
as | •
_
the
i
Economy,
and
The:
Its
Prospects—Sumner
,,
.
Schhchter
•
.
•
within
1"
.1. i
the
'
? 1
1
_
'
.
province
*
of
*
J.
_
those
States. A
"Y' The fact is also that it has
under
•
_
.
been
;
T».
Alfred A. Knopf,
that
the
for racial
so-intense.
faet
of
legislation become
And
it
legislation
from
the
how
is
the
comes
today
not
Republicans; regardless
may have voted in
their
or
leaders
may
have spoken in the past, but from
left-wing crowd that has
tured
It
•
i-\
v*
i
*
I
r\
1
University
Individualism
the Democratic
leaves
the.
Economic
and
Order—Friedrich A.
Hayek—Uni¬
versity of Chicago Press, Chicago,
111.—cloth—$5.
Influencing and Measuring Em¬
ployee Attitudes—American Man¬
agement Association, 330 West 42d
Street, New York 18, N. Y.—paper
—$1.
;
-
Local
Planning -and
Zoning-
Manual of powers and procedures
regulars in an awful fix. It has looked, of course,
for citizens and government offi¬
the
cials—Bureau
to
Republicans
out-bid
the
as if
going to try
Left-wingers for
were
the racial conscious vote., That is,
they
going to try to do this
in this campaign.
f
^ut it is becoming increasingly
clear that the Republicans, inso¬
far
were
as
the
cerned,
National ticket is
are
not
con¬
going to do
any
such
partment
N.
of
of
Planning,
Commerce,
Y.—paper.
—
;
Employee
American
Re¬
supporters,
of
the
been
that
as
well
Management
New York
18, N. Y.—paper—$1.
as
Middle
West,
has
would,
under
the
he
from
racial groups, be
forced to adopt this as a National
pressure
policy
The
in
present
indications
creasingly
such
the
clear
are
campaign.
becoming in¬
that
he
has
no
intentions.
As the matter stands, there cap
be no question of a distinction,
in
tion—1948
road
edition—Eastern
using the
am
have
Conference, 143
Liberty Street, New York 6, N*. Y-.
—paper.
; •••:
;
.
used
same
from
this
rostrum
cloth—$5.-
an
folks
said
all,
the inflationary use
inflated
supply. The
urged—I almost
bedeviled—into taking care
have
rather
any
place
talk
to
a
fellow citizens than
my
jn that occasion, the title under
which I
spoke indicated the gen¬
money
been
that
of
That
remarks.
my
"Too Much Money." And,
was
generally speaking, as befits a
speaker
in this Great Hall,
I
urged the members of this Cham¬
ber,
and
particularly those
of
them
who
are
responsible
for
banking operations in this com¬
munity, to try to get control of
the processes and policies which
were contributing to the inflation
of ouf money supply.
And
I
concluded, as a good
speaker ought to, with a plea for
suggestion
monetary
commission, or some such body,
to
study this whole subject of
money and credit, and to devise a
Federal Reserve System suited to
present conditions.
action,
some
that
was
the
and
we
needed
a
money
"
'
own
Again, in 1946, it
was my
privi-
ST. LOUIS
obligations.
.Even E Bonds bought
a few
years ago, if redeemed to¬
day, though redeemed at par, will
PHILADELPHIA
buy about half of their purchasing
at the time the bonds were
power
(
In
CORAL GABLES
A
our
Tax
business of security,
own
of course, the proceeds of our life,
insurance policies will also buy
less
they were expected to
buy
when
the
policies
were
bought.
But
in
that
same
field
of
INVESTMENT
same
It
a
BUCKLEY SECURITIES
pro¬
Walnut
St.
*
Philadelphia 2
44
Wall
Members St. Louis Stock
Exchange
WHitehall 3-7253
Private Wire System between
T
New
York
and
Los
Angeles
SPOKANE, WASH.
em¬
the
Social
Security
the contribution of the
Special Reports Available:
NORTHWEST MINING
SECURITIES
employee to that Fund has been
thrown away and wasted, because
the
two dollars which they,
in
combination, have contributed will
one
STREET
Street
New York 5
,
PEnnypacker 5-5976
to
or
OLIVE.
St.LouisI.Mo,
CORPORATION
1420
SECURITIES
Request
fact today that
either the contribution of the
Fund,
on
509
Philadelphia,
is, in effect,
ployer
Memo
se¬
curity, the Social Security bene¬
fits, reasonable, to say the least,
when they were established, now
totally
insufficient,
have
de¬
creased in value in the
Stix & Co.
Participation
Certificates
than
dollar's worth of
se¬
For
Black, Sivalls & Bryson
or
of
'
Immediate Execution of Orders
Quotes call TWX Sp-43
Exchange
A.M.,
Strawbridge & Clothier
from
Std.
Pac.
10:45
Time;
on
to
Floor
11:30
Sp-82
other hours.
at
,
curity today.
We,
ance
for
at
least, in the life insur¬
business,
the
are
:;:An
depreciation in
the
Company
STANDARD SECURITIES
pur¬
CORPORATION
H. M. Byllesby & Company
PHILADELPHIA
address
monthly
Warner
not responsible
by Mr. Parkinson
meeting of Chamber
of Commerce of the State of New
Y.—
but rather to
in
at
N.
good
a
not related to inflation at
was
of
language I
Street,
19,
There has been
deal of talk about inflation which
practical
problems except
—John Day Co., Inc., 62 West 45th
York
still farther.
money.
on
no
-
Wandering Scholar—M. J. Bonn
New
repudiation
Now, by inflation, I mean the
great increase in the supply of
no
chasing value of the proceeds of
•
hidden
—
Rail¬
Presidents'
this
of
they didn't use the extra
which they have in their
pockets for inflationary purposes.
1935
combination of confisca¬
They have been urged to save.
tory
taxation
and
repudiation,
I think we all agree now that
They have been urged to buy E
which is known
by the poetic
inflation has provided too much
Bonds.
They have been urged to
name of inflation.
money.
We
have
too
much
do various things which will not
We have had
confiscatory taxa¬ result in inflation, but, at the same money.
As individuals, we all
tion. I don't mean the
high income time, the inflation of the money like to have more money. It feels
taxes; I don't mean the high cor¬
supply has continued to pour ad¬ good in the pocket, and it is nice
porate taxes, Or the excess profits
ditional money into their pockets to feel there is something left in
taxes.
I mean the hidden
tax, and to void inflation by avoiding in¬ the bank balance, but that feeling
it affects all the people of this
exists only as long as the other
flationary
use
of ' the
inflated
country, and all of the ,business¬
.fellow doesn't catch up with you.
monfey.
men
of this
When costs go up faster than your
country—it, is in the
The President of! the American
form of increased cost of
living Bankers
rising income, then you will begin
Association last year said
and of doing business.
to realize that more money of less
that
what
we
were
doing was
;The housewives need more
purchasing value is of no benefit
pouring inflammable oil on a fire
to you, and that is what is going to
money and so does the manage¬
that threatened conflagration.
ment of very
happen even to the farmers, and
business, big or litMay I add that the present situ¬ the organized labor men of this
little, in the country.
ation, in terms of fire—and infla¬ country. The pleasure that they
Even my banking friends feel
tion is like a fire—is like a situa¬
have at the moment of increased
the increased cost of operation and
tion in which the Forest Rangers
amounts of money to spend will
the problem of keeping up with it.
call out the -villagers to prevent
only last so long as that increase
We have had the repudiation. the destruction of a
village in the keeps ahead of the costs which the
Unless we get hold of ourselves
path of a great fire by urging the other fellow imposes on them.
we will have a lot
more.
villagerswithv pitchforks
and
That is the history of an in¬
We have had it in the hidden broomsticks and the soles of their
flated, money supply, and it will
form of depreciation of the value shoes to put out the fire, while be true here as it has been
every¬
for practical purposes of the
where else.
pro¬ they, the responsible public repre¬
ceeds of all obligations
sentatives, go off and add fuel at
I am sorry that I cannot report
payable
in dollars.
We have had it par¬ the spots where the fire seems to
;
(Continued on page 22)
" '
ticularly in the depreciation of the be dying out.
I
buy only
Year Book of Railroad Informa¬
and
vance
this
Association, 330 West 42d Street, portion.
thing. Or rather, they are
going any further than they
Problems and Experience Under
have already done.
The Dewey campaign literature the Labor-Management Relations
points out that he had FEPC leg¬ Act—American Management Asso¬
islation passed for the State of ciation, 330 West 42d Street, New
York 18, N. Y.—paper—75c.
New
York.
The
worry
of his
those
continued
our
have inflation that these
admit, has proceeded to an impor¬
tant point and threatens to ad¬
to
that false and fraudulent—and
or
Albany,
7. Y■■■ ,'■*
Nevv Patterns of
lations
De¬
not
Southern
previ¬
said
important
an
bought.
:
cap¬
party
solution for
of
be¬
securities payable in money exist.
That inflation, I think we now all
confiscatory taxation, repudiation,
-
party.
Southern
had
proceeds of the Government's
further
they
Congress
the
_
v\
Press, Princeton, N. J.—cloth," $6.
that.the threat of this offen¬
sive
*
H. Giddens—Princeton
racial
consciousness has been developed
to its present pitch and the agita¬
tion
,,
.
v\
New" Deal-Democratic
the
Administration
to say to this
Chamber what
where there would be
group
Chamber
in this Great Hall.
is
It
I
and reduction of the real value of
» public officer,
that if the spending - by
namely,
we
inflation.
*
■
know
would
where
title
correct,
being turned against them, Inc., 501 Madison Avenue, New
fact is, of course, that no York
22, N. Y.—cloth—$2.75.
anti-lynching legislation has ever
been
passed;
neither
has
any
Early Days of Oil—A Pictorial
FEPC legislation except in three
TS.
Eastern States,' which under the Hlstory of
Beginnings of the
T
t_J
r«trl
mil
States Rights philosophy is quite Industry
in
Pennsylvania—Paul
A.
j.'v-
have
one-
I
ing,
of the most-wholesome
The
A
Parkinson
have
this
address
to
occasion.
eral trend
ously
I.
Security
responsible for the pol¬
hidden taxes and high cost of liv¬
'
T.
admin¬
the
Social
:
lege to address this Chamber, and
it is my privilege and an honor
privilege
was
I
sorry
destroyed
its original value.
half of
cause
are
and
the
which
We
to
responsible
am
am
1935, it
my honor
and
'
tables
f
-
of
are
icies
it is country to be without
regard to
things where the money was to come
that has happened in this
country from, we would reach the
point
in a
have!
find
it
be-
this
the capacity of
In
creation
Fund
speaker.
that
government
If
one
as
they
1
More
.
are
the
ap¬
Chamber in
motives
minority group.
If they
haven't
given
up - nope,
they
should do so, because the indica¬
tions
the
rore
that those who
for
istration
:—~—
—
I
But
say
his
1
scious
named.
up
to have
by these
almost
—-
policies.
our
atten-
to
on
pearances
the
fact
,
for '£
e
speaker
previous
have given up
hope of "getting the Negro
vote," as the expression goes, or
the vote of any other racially con¬
man
rather,
or-
ti
Republicans
West,
*
in
apparent situation.
the accents of. the East and Middle
V
one
t
call
to
any
Southerners
"
would
for
But
"
I
a
your
.
'
i
p r
i
Southerners, irrespective
Rights Presidential
candidate
Thurmond
is
saying,
between Dewey and Truman. It is
making the Southern party reg¬
ulars squirm.
•••"
ora-
duels.
Bergeron
the
of what States
flag
and
tory,
'
Carlisle
for
York, New York City, Oct. 7, 1948.
>
OFFICE
Telephone
Exchange
of Spokane
„
Stock Exchange Bldg., Phila. 2
RIttenhouse 6-3717
Members Standard Stock
Teletype
PH 73
Brokers
-
Peyton
.
Dealers
-
Underwriters
Building, Spokane
Branches
at
Kellogg, Idaho and Yakima, Wn.
—
8
(1540)
COMMERCIAL
THE
A New
&
CHRONICLE
FINANCIAL
Philosophy of Security Selling
Dealer-Broker Investment
By VICTOR COOK*
Partner, Merrill Lynch, Pierce, Fenner & Beane,
Recommendations and Literature
,
Members of New York Stock Exchange
It is understood that the
Mr.
Cook, stressing customers' broker performs important function in capitalistic system, points out
he not only sells securities but also ideas and his own personality.
Outlines work of customers' broker,
whom he calls "account executive," as financial counsellor and service man.
Warns need for sincer¬
ity, alertness and wide knowledge in informing and advising clientele. Holds chief responsibility and
allegiance is to customer, whose position and standing should be carefully grouped and studied individually. Lists ten overall principles for customers' broker's success.
It
to
Equipment
.
about "A New Philosophy
Security Selling." Possibly you will doubt the philosophy, question the newness, and
have misgivings as to whether only selling is involved.
Primarily, however, I am going
gives
great pleasure to be here today and talk to you
me
of
about^
talk
to
Thursday, October 14, 1948
send
firms mentioned will be pleased
the following literature'.
interested parties
Certificates—
Trust
Booklet—Harris, Hall & Co., Ill
West
Monroe
Street,
Equipment
Chicago
Trust
3,
Financing—
Pamphlet discussing such financ¬
ing from the investor's viewpoint
has
subject
always
appealed
to
and, look¬
me
ing back
ape r
i
o
over
d of
many years,
Victor
B.
Cook
I
seems
it
have
been closer to
that
toiler
in
any
other.
I
the
Street
than
to
have witnessed the
metamorphasis
of
his
title
from
that of lowly and unlamented cus¬
tomers'
its
to
man
impressive
form
present, more
I have ob¬
and
served him at work in many parts
of this country and abroad where
his
operations
those
of
remissier,
or
described
are
half
commission
just plain,
as
man,
ordinary
broker.
Regardless of his locale and the
title by which he is known, there
are certain
standard, basic traits,
patterns and methods common to
all who
are
of
gree
successful, and the de¬
is
success
dependent
largely upon his willingness to
recognize at all times the impor¬
tance
I
such
of
scious
guides.
the
fact that
of
address
consists
I
am
the
of
con¬
group
men
with
various degrees of experience and
all have been successful to date.
Notwithstanding, I shall offer
no
advice not suitable in my opinion
for anyone in our
or
business—young
Many older, experienced
old.
have
men
faltered
overlooked
have
they
importance
of
the
fundamentals
because
which
recognized
young
and
utilized
to
discussion such
this, the obvious first question
is
"What
is
Account
an
Execu¬
tive?"
to
Many people are satisfied
answer
by saying: "He is a
salesman and sells
call it
was
a
day.
to
securities," and
For a long time he
referred to in far less flatter¬
pos¬
the
cus¬
revert to your
original status and
salesman against
his now sophisticated resistance to
Good
In
examples of important your individual suggestions.
idea
selling
are
reorganization your role as a financial counsellor,
railroad securities at various times you will be expected to assist and
in recent years, aviation shares in advise in many matters not al¬
the troublesome days just prior to ways directly related to the han¬
war, automobile securities in the dling of a buying or selling order.
early twenties, commodity futures Your client may want your ideas
since shortly after Pearl Harbor, about setting up a will or creating
and right now the field of elec¬ a
trust, 'what proportion of his
tronics provides wide scope for assets should be in various invest¬
categories;
whether
he
the imagination of those who be¬ ment
lieve they see the full possibilities should "buy real estate or put a
of television opening up.
As a mortgage on his old homestead;
matter of fact, account executives is Robert R. Young a menace or
exploiting the idea angle of sales blessing to American railroads;
pit
skill
your
as a
Broadway, New York 5, N. Y.
Corp.—Memo¬
Bros. & Co., 120
Broadway, New York 5, N. Y.
Lehigh Valley General Consoli¬
dated
Mortgage
sion—Vilas
&
Bonds—Discus¬
Hickey,
Street, New York 5,
Also
available
current Railroad
49
Wall
N/Y.
is
leaflet
a
of
Developments.
Lehman
Corp. — Analysis
of
changes in portfolio^—Ira Haupt &
Co., Ill Broadway, New York 0.
parison of 19 New York City Bank
Stocks—Laird, Bissell & Meeds,
120
Foods
Michigan
Steel
Tube
Products
Co.—Analysis—Herrman
Sam¬
&
uels, 120 Broadway, New York 5.
Population
of
California
1940
.■
technique have already developed
a
good deal of business in secu¬
rities like Radio Corporation of
America, presumably destined to
profit by television's success.
what to do about his Nickel
and
Plate.
Frankly,
scribable
limit
is
there
to
the
no
scope
deof
inquiries that will be made, but
you move along you will learn
and
1948
Brochure
Heller,
Co., Mills Tower, San
Francisco 4, Calif.
Bruce
—
Television—Analysis of
tunities
H.
Hentz
Co.
Valley
Barge
Line
Analysis — Taussig, Day &
Co., Inc., 316 N. Eighth Street, St.
Louis 1, Mo.
—
oppor¬
&
Co., 60
Beaver Street, New York 4, N. Y.
—
Mississippi
—
&
New England Public Service Co.
—Analysis—Ira Haupt & Co., Ill
Broadway. New York 6, N. Y.
Trucking Industry—Analysis of
outlook with special discussion of
Associated
Transport,
Inc.,
and
U. S. Trucklines, Inc. of Delaware
Republic Aviation Corp.—Memo¬
randum—A.
Also available is
current
a
discussion of
developments
in
Rail¬
M.
Kidder
Wall Street, New York
—Eastman, Dillon & Co., 15 Broad
Street, New York 5, N. Y.
St. Lawrence
cular—Stern
& Co., 1
5, N. Y. -
Paper Mills—Cir¬
&
25
Co..
Broad
Street, New York 4, N. Y.
roads.
Utility
Companies—
Holding
as
Brochure—William R. Staats Co.,
to enoy them and each new ex¬
Obviously, there is no intention
640 South Spring Street, Los An¬
perience will fortify you for the
to
imply that all general ideas
geles 14, Calif.
next encounter.
♦
'■
*
*
*
mature as expected, because fre¬
Aerovox Corp.—Circular—John
quently they do not. I simply wish
A Service Man
to stress the point that many an
B. Dunbar & Co., 634 South Spring
A well seasoned account execu¬
account executive is highly suc¬
Street, Los Angeles 14, Calif.
tive must become proficient in an¬
cessful because, first: he is able to
other
highly important depart¬
American Gas and Electric Co.
develop sound ideas, and second,
-
ment, namely: that of service man. —Summary and opinion—E. F.
Assume, for example, that the Hutton &
Co., 61 Broadway, New
The
third
selling
ingredient
mythical client just discussed who York
6, N. Y.
which I have mentioned, namely,
had $10,000 and no knowledge of
the account executive's own per¬
securities, was instead an impor¬
Arkansas Western Gas Company
he is able to sell them.
Seattle
Department of Lighting
—Detailed
showing
report
and
estimated
and
bond
also
chart
annual
reve¬
service
charges—
Co., Exchange
Bldg., Seattle 14, Wash.
nues
Pacific
Northwest
Television
Fund,
Inc.
New
—
brochure—Television Shares Man¬
agement Co.,
135 South La Salle
Street, Chicago 3, 111.
,
sonality, calls for some comment.
Used generally, a good definition
of personality is: "The quality of
being a person." Used specifically,
it becomes: "Distinctive
personal character."
count
as
but
tomer, the selection of individual
securities becomes almost routine.
to
a
convictions
and
asm
merits of
securities
of
men
accelerate their progress.
At the start of
to the relative
number
a
The
as
General
randum—Sutro
—McMaster Hutchinson & Co., 105
South La Salle Street, Chicago 3,
likely to remain in the situation 111.
Mutual
Funds
and
indefinitely, provided—
the
New
aspects of the
(a) that you do at least a rea¬ American Capitalism—Brochure—
work
of
the sessed of a strong conviction that
account exec¬ certain factors indicate that a par¬ sonable good job, and-,
Watling, Lerchen & Co., 40 Wall
utive, the title ticular industry is likely to have
(b) that the client does not de¬ Street, New York 5, N'. Y., and
applied in my much better than average pros¬ cide at some future date that he Ford Bldg., Detroit 26, Mich.
firm to mem¬ perity. Jones will press the idea knows more than you.
New York City Banks Stocks—
with vigor and should he be suc¬
bers
of
our
The latter will happen frequent¬
sales ' staff. cessful in conveying his enthusi¬ ly and when it does you simply Third quarter analysis and com¬
the overall
mind
High yield—Data on request—
George Birkins Co., 40 Exchange
Place New York 5, N. Y.
executive
client
a
or
or
notable
When
exposes
an
ac¬
himself
prospective client, it
should always be with the thought
in mind of eventually, if not im¬
mediately,
a
person
of
one
acter.
ceasing
to
be
merely
to that client but rather
distinctive personal
To accomplish
char¬
this, he must
strive at all times to imprest his
client with his sincerity, honesty,
tant
trader
whose
account
carried .with another firm.
was
In all
probability, he would tell you that
he had his own ideas and opinions
about the market and stocks, that
he did not
or
you
that
his
only
service.
would
care
anyone
Upon
learn
particularly what
thought and
requirement was
else
questioning
that
by
service
—Detailed information for dealers
he
posting him throughout the
day on what the market was do¬
reading all news of impor¬
tance.
advising him of rumors,
Eastern
Transmission
Circular
Rauscher,
Co., Mercantile Bank
Bldg., Dallas 1, Tex.
—
—
&
—Comstock &
Co., 231 South La
Street, Chicago 4, 111. y
Salle
Transgulf
Sherman
Bank of America, N. T. &
S. A.
Corp.—Data—L.
&
New York
Co., 30
5, N. Y.
Pine
D.
Street,
—Circular—First California Com¬
pany,
Montgomery
300
San Francisco 20,
Street,
Calif.
you
meant
Texas
Corp.
Pierce
Bethlehem
Steel
Corp.
—
Cir¬
cular—Smith, Barney & Co., 14
Wall Street, New York 5, N. Y.
ing,
Black, Sivalls & Bryson, Inc.—
gossip, obtaining quotations, etc., Analysis—William
A.
Fuller
Warner
Co.—Analysis—H. M.
Byllesby & Co., Inc., Stock Ex¬
change Bldg., Philadelphia 2, Pa.
Willys
J.
R.
way,
Overland
Analysis —
Co., 115 Broad¬
New York 6. N, Y.
-
Williston
—
&
&
Winters
&
Crampton Corp.—
Co., 209 South La Salle Street,
Analysis—C. E. Unterberg & Co.,
would learn Chicago 4, 111.
61 Broadway, New York 6, N. Y.
that he was quite well satisfied
possessed all the mental 'equip¬
Also available is r<n analysis of
with his present broker but never¬
Central
Foundry — Analysis —
ion, quate unfair and constitutes ment
to insure success but have
almost a libel on a
theless would give you a chance Goodbody & Co., 115 Broadway, Miles Shoes, Inc.
large, impor¬ fallen
by the wayside simply be¬ to
tant body of individuals who con¬
demonstrate your value.
In New York 6, N. Y.
cause
they never succeeded in
this instance, you have overcome
Wisconsin
Central
Airlines
tribute much to the orderly func¬
Also available is an analysis of
overcoming personality shortcom¬ the
Loewi
&
hurdle of salesmanship, skip¬ Illinois Central Refunding Mort¬ Data
tioning of the capitalistic system
Co.,
225 East
ings that marred their technical
which all of us seem so anxious
ped the barrier of financial coun¬ gage Bonds and leaflets on Stand¬ Mason Street, Milwaukee 2, Wis.
virtues.
Later on in this talk I
to preserve in these
sellor, but are smack up against ard of Indiana and Corn Products
trying times. hope to elaborate on the theme.
the highly technical requirements defining.
Furthermore, to the extent that
of a service man. In my opinion,
he is a salesman, he sells not only
Chicago
Transit
Authority —
A Financial Counsellor
no
division of ari account execu¬ Circular—White, Weld & Co., 40
tangible securities but ideas and
Having discussed the account
his own personality. I doubt the
tive's duties places him so con¬ Wall Street, New York 5, N. Y.
"Happy Birthday," Oct. 16 to
executive as a salesman, we now
Max E. Pollock, executive Vicenecessity for describing what is look
stantly on the spot where his
at him in another
capacity,
of
William
E.
Pol¬
meant by selling securities
Consolidated
Rendering Co.— President
shortcomings
can
be
detected
any
namely, that of financial counsel¬
lock
& Co.
more than it would be
Atherton
&
quickly as that of service man. Report -— Schirmer,
necessary
lor. As a salesman, you have cor¬
to
The reason of course is that specu¬ Co., 50 Congress Street, Boston 3,
Inc., 20 Pine
explain
that
an
automobile
nered and roped the prospect who,
salesman sells automobiles. Some
lative trading accounts are highly Mass.
Street, New
although quite willing to submit
York
Coral Gables Tax Participation
time, however, can be devoted
City,
sought after, competition is keen,
to the routine of becoming a cus¬
dealers in
Memorandum —
and if you fail to observe market Certificates
profitably to the importance of
tomer* and
opening an account, phenomena and post your client Buckley
U. S. Governthe other two
Securities
Corp.,
1420
ingredients, namely:
m e n t,
the sale of ideas and the sale of unfortunately doesn't know much promptly, the chances are great Walnut Street, Philadelphia 2, Pa.
terri-
ing terms but fortunately that is
now
a
thing of the past.
Such
brusque treatment is, in my opin¬
cooperativeness, intelligence, will¬
ingness to work, etc. Many have
etc.
Undoubtedly
you
—
—
Happy Birthday!
—
one's
own
personality.
Important
Idea
about
Selling:
Assume, for example, that Mr.
Jones, an account executive, is
calling
on
a
client, perplexed in
*A talk by Mr. Cook before the
Investment
Association
of
New
York,
1948.
New
York
City,
-
Sept.
.
any
security.
he asks you,
29,
Accordingly,
quite properly, just
that some
what he should do with his $10,000
your
and you
he
that
quite
As
a
a
you
then begin to appreciate
have become something
different from
matter of
financial
fact,
salesman.
a
you
counsellor
are
and
now
with
respect to the particular client are
one
t
trader is long only in stocks,
wish to have the news
will
because
of
Diebold,
Inc.—Memorandum—
Clement, Curtis & Co., 141 West
Boulevard, Chicago 4, 111.
Also available is data on Skil-
ties
A dividend cut is announced which
—G.
must be reported promptly to one
who might want to get out before
(Continued
on
page
30)
and
Inc.
Doehler-Jarvis
Walker
Mountain
Coal
Co.—•
in
state, munici¬
pal.
housing
authority and
Corp.—Analysis
& Co.,
1 Wall
corporate
Gauley
un¬
derwriters and
Street, New York 5, N. Y.
;
Securi¬
dealers
saw,
H.
and
Land
o
Bank
Jackson
possible sympathetic
in the stock department.
response
ria 1
Federal
else will.
Commodities, for example, may
break sharply and even though
Max Pollock
curities.
se-
THE
Number 4742
Volume-168
A Hew Plan for
COMMERCIAL
Distributing Stock
&
FINANCIAL
standby offer¬
ing of Columbia Gas System shares without underwriting.
common stock of the company.
The offering
along the same lines as formerly had been the
by one or a<^
group
of
investment
banking the underwritten stock during the
houses, but The First Boston Cor¬ life of the-underwriting agree¬
poration was engaged by the com¬ ment instead of after its expira¬
not underwritten
cases
to organize security dealers
pany
obtain
to
subscriptions for shares
of the new stock. According to the
plan any member of the National
Association of Securities Dealers,
Inc. may obtain a prospectus and
a copy of the participating dealers
agreement containing full infor¬
mation with respect to the offer¬
ing, and the compensation pay¬
able for obtaining subscriptions,
from The First Boston Corpora¬
tion.
The
participating dealers
make
no
underwriting commit¬
ment
so
the
plan permits any
dealer to participate in the trans¬
action without incurring the risks
peculiar to stand-by underwriting.
,
Under the plan, dealer distribu¬
tion mechanism is employed and
can be used in two ways to effect
tion.
stock during a
will extend from
period' which
Oct. 28. Should
Oct. 5 to
a
dealer
be instrumental in getting a stock¬
holder to invest in the new issue
by
exercising
his
subscription
warrant, the dealer is compen¬
sated
the
at
rate of
25
cents
per
plan can be uni¬
versally
adopted
in
all
stock
underwritings, of course, will de¬
pend on market conditions and
the price of the new shares in
relation to price of outstanding
If there
stock.
vantage
the
execution
of
way
compensation
stock
a
dealer
a
is
by
order.
can
earn
selling
the
stock to investors other than
new
stockholders. To do this
however, he must make a short
sale and cover it by buying sub¬
scription
rights and exercising
them. The subscription rights in
company
Columbia
the
provide
means
Gas
of
in
the
offering
of
the
(Special
LOS
to
The
Leonard
has
first
Boulevard.
with the
He
previously
was
William Walters
Securi¬
ties Company.
With
purchases by dealers in
of
vance
stock
disposal
to
The
LOS
ANGELES, CAL.—Sanford
now with Bingham,
Walter & Hurry, 621 South Spring
Street, members of the Los Ange¬
les Stock Exchange. He was for¬
merly
with
Stephenson,
Leydecker
Co.
&
Paine, Webber Co. Adds
(Special
to
The
BEVERLY
Chronicle)
Financial
CAL.
HILLS,
McAfee
has
R.
—
added
been
to
the staff of Paine, Webber,
Jack¬
Curtis, 364 North Camden
&
son
idea
own
t
util¬
see
tion
of
as
Such
invalid
the
no
for
government
businesses.
tion is
of
s
as
milk
over
confisca¬
the socializa¬
the
baking
organize
against public ownership of the
electrical industry.
industries.
>
or
Thus
they
Private home builders in Amer¬
more
cubic feet of
of
points to the practice
the
to
result,
geons
the earth.
They rebel at the idea
of
having no choice except quit¬
ting their indeavors or becoming
morsel-chasers
as
of
such
contracts
bureaucracy sees fit to dole
Thus private homebuilders
oppose public housing.
a
as
degrading
science of medicine.
As
a
most
physicians and sur¬
fight socialized medicine.
Here we have it.
Each. group
opposing the goring of its own ox!
Little if any thought is given to
the crime of goring. It is an though
a
patient came to you with a
dozen irritatingly located boils. I
doubt
that
you
would
render
service to each boil.
Instead, you
attempt to diagnose the
systemic trouble. You would try
would
to
it
find the cause, and deal with
rather than the manifestations,
sentiment for socialized medicint
If
Combating Socialism
the
right questions
it
ever,
into
is
be lullec
security b.
striking am
well not to
false
a
sense
of
such
findings. The
dangerous fact is that of the onehalf of the adult population hav
ing opinions for or against social
ized medicine, 28%
of these a*v
for it.
If the unthinking can L
depended upon to conclude n
worse than those having opiniom
then
about
14,000,000
month's voters
can
be
Minorities,
not
majorities, pv.i
over things of this sort.
Don't fo.
get that only 1%%' of Russiar.
medical
were
in
a
but
sense
as
a
socialized medicine
observations
consultant
My
sense.
suggest that
you,
as
of
communists when that gan
revolutionaries seizes
violent
their
well
as
the
other
this
groups,
government
31
October.
This
announcement
is neither
an
offer to sell
nor a
solicitation of
an
offer to buy
any
of then
The offer is made only by the Prospectus.
pocket-size prospectus for the
salesmen
use
The
con¬
the
of
the
long-winded
unwieldy
prospectuses
monly employed in stock
offerings. The advantage claimed
by the plan is that it permits
dealer to participate
any
in the stock
distribution without incurring the
risks
of
These
risks
have
underwriting.
caused
under¬
writers in the past to reduce their
commitments,
selling
the
1929
presentation
'
.
will
BANK
of
;
(Incorporated in New Jersey)
Toronto,
Canada
dividend
said
The
CANADA
OF
in
will
issue
1929
be
respect
u
that
advised
adian
tax
payment
Federal
withheld
at
of
Income
thorities
said
source
on
tax
return.
order
In
(Form No.
duplicate
601)
must
relative
to
the
deduction
available
can
If
Forms
local
at
one
a
and
Certifi¬
No.
United
601
States
be secured from the Com¬
Toronto.
Subject to the Regulations of the Custo¬
of Enemy Property, non-residents of
A cash
dividend of $1.00 per share.
dividend payable in
capital stock of
.this Company of five (5) shares of such
stock for each two hundred
$25.00
par
(200) shares
may
dividend
by
United
foreign
the
Canadian
States
dollar
Currency,
currencies
are
as
only through
i.e.,
Canadian
a
chartered
or
bank.
an
branch
The
Authorized
Dealer
Authorized
of
1
By order of
C.
mailed.
>
MINION, Secretary
,
and
permitted foreign
any
Checks, stock and scrip certificates will be
,
STANDARD OIL
any
.
_
*
COMPANY,
Eugene Holman, President,
Dealer,
Canadian
Agency of the Royal
of Canada, 68 William Street, New
City, is prepared to accept dividend
cheques or coupons for collection through
an
October U> 1948,
a
Bank
Issued.
A. C.
Capital Stock of Standard Oil Company for 20 shares of Common
The terms of the exchange offer are set forth
Prospectus, dated June 11, 1948, copies of which are obtainable from GUARANTY TRUST
COMPANY OF NEW YORK, 140 Broadway, New York 15, New York, or MONTREAL TRUST
COMPANY, 61 Yonge Street, Toronto 1, Ontario, Canada, who are acting as agent and sub-agent,
respectively, for the purpose of effecting the exchange.
■
Stock of International Petroleum Company, Limited.
per¬
York
thereof.
Limited in the ratio of 3 shares of
in
Regulations of the
Canadian Foreign Exchange Control Board,
at the official Canadian Foreign
Exchange
Control
rates
prevailing on the date of
presentation.
Such conversion can be ef¬
of business three o'clock p.m., on October 22,
1948. No fractional shares of stock will be
Scrip certificates will be issued in lieu
Standard Oil Company is offering, until January 31, 1949, 1,265,255 shares of its Capital Stock in
exchange for Common Stock (without nominal or par value) of International Petroleum Company,
general
fected
value outstanding.
Such dividends will be payable December 9,
1948 to stoclcholders of record at the close
this
convert
into
other
mitted
value)
cashing
copies with
pany's office or the Royal Bank of Canada,
capital stock:
or par
be com¬
Bank
and the
the shareholder.
not
such
(without nominal
for which purpose Ownership
Certificates
Canada
COMMON STOCK
to
United States tax au¬
require evidence of the deduction
tax,
to
allowable
their United States
dian
the
exchange for
INTERNATIONAL PETROLEUM COMPANY, LIMITED
deducted
or
is
coupons
claim such credit the
are
has this day .declared the following dividends
in
credit for the 15% Can¬
a
against the tax shown
banks, they
(Incorporated in New Jersey)
($25. Par Value)
Shareholders resident in the United States
are
cate
COMPANY
CAPITAL STOCK
shares
of
by cheque mailed
from the offices of the Company on Novem¬
ber 18th, 1948, to Shareholders of record at
the close of business on October 22nd, 1948.
paid
payment of the tax and return
The Board of Directors of the
STANDARD OIL COMPANY
be
delivery
'
4
and Church Streets Branch,
certificate
OIL
No¬
shares
issue
and
,
the coupons will endorse both
STANDARD
of
ROYAL
pleted in
€sso.
after
or
respect
represented by Registered Certificates of the
of
stand-by
Company of
upon
upon
stand-by
on
1,265,255 SHARES
in
King
and
bond
payable
1948.
THE
com¬
on
be
dividend
Coupon No. 70 at:
taining essential information and
eliminating
said
represented by any Bearer Share Warrant
paid
investors
and
has been declared and that such
will
19th,
.
i
conversion
into
...
the
Bearer Share Warrants of International Petroleum
MULLINGER,
Secretary;
14tfi October,. 1948....
*
^
Company, Limited, received by
before October 22, 1948, will not be in proper form for exchange
No. 70 and all subsequent coupons are attached. .
undersigned
unle:s coupon
currency.
434 University Avenue, Toronto 2, Canada
;...
NOTE:
on
the Board,
H.
of ne>
earmarks
in favor of socialized medicim
years
ag
And here at horn
have
been dealing with symptoms, not I doubt that a single one of th
plunderbund items legislated dur¬
the disease; with effects, and not
Likewise,
most
citizens
who
the cause. This group, as well as ing these recent socialistic year;
choose
any
one
of
the
many
those items that parade under the
branches
medicifte as their pro¬ each of variotfs other groups, has
name
of
"socia.
been crying out against rent con¬ euphonious
or
public
trol,
ownership,
or
gains," could have obtained any¬
*An address by Mr. Read before
public housing, or socialized med¬ where near majority approval be ¬
the Annual Meeting of the Ameri¬
icine, or a host of other govern¬ fore they were enacted "for" the
can Physicians and Surgeons Asso¬
ciation, Akron, Ohio, Oct. 1, 1948. mental invasions into the realm
(Continued on page 24)
Shareholders and the
dividend
askec
Now, be it understood that I
am here, not as a consultant in a
Shares.
vember
are
there actually appears to be a de¬
crease
in this.. sentiment... How
as
homes per capita than have ever
existed elsewhere on the face of
Holders of Share Warrants
Currency
.
is
Company, Limited
to
bee
work.
International Petroleum
Notice
have
undament*.
socialism.
cause:
It
all
more
Notice is hereby given that a semi-annual
distribution of the stock, there has
been
designed
a
light-weight,
of
nearly
dividend of 25 cents per share in Canadian
connection with the offer¬
ing, and to assist dealers in aiding
.A
managen
in¬
In
on
e
out.
vestors.
of
Read
ica have built
Chronicle)
Financial
I. Drucker is
ad¬
to
d
taking
their
Bingham, Walter Co.
^Special
price inflation in the rights that
might result from the simultane¬
ous
E.
ANGELES, CAL. —Philip
Seifert has joined the staff of
C. E. Abbett & Co., 3277 Wilshire
Drive.
he
'
Stockholders
ities
Chronicle)
M.
new
until
control.
a n
Financial
But
neglecting the
v
firm under¬
buy the corresponding rights
market
rent
reasons
not
the
ments
private
the
sold the stock short. The purpose
of this is to prevent any sudden
move
will
shares,
a
in
-against
Seifert With C. E. Abbett
Jane
may
the
in
transaction
investors
gether
yf |ii§
erty.
well to inquire, how art:
They resent you and the others getting on with,
becoming automatons this particularized tactic? V
of a political power, not merely
As Dearly as I can tell from
because this is personally distaste¬ review of opinion polls, there i
recent
increase
in
ful, but because all the evidence no
nation*,,
rect their
writing agreement.
instrumental in
to
associate
This is particularly true of the
competent ones. They prefer to be
responsible for their work, and
they believe it best that they di¬
themselves to-
capital from
the
discrim¬
ination, they
vjpig
•
causing rights to be exercised. In
such cases, however, the SEC has
ruled that a dealer wishing to sell
stock
this
in order to be
new
To combat
ers.
sub¬
stock,
new
undoubtedly desire
for registering the
of dealers
names
the
Citizens who chose to invest the fruits of their labor in homes and
apartments, instead
or
corporation stock, do not like rent control. / They ask, quite rightly, wh^
should their investments be picked out,
why should their property be expropriated, &o
a special
priv-<$ilege to rent¬ fession insist on freedom of action. of enterprise and private prop¬
of in farms
little ad¬
or
no
company,
assured
which is higher than the
commission commonly obtained in
Another
to
issuing
is
stockholders
to
scribing
share,
the
the
Whether
placement of the
in
Asserting socialism begets socialism and corrupts reason and morality, Mr. Read points out move for
socialized medicine is integral part of socialistic
thought pattern and is one of many symptoms of the
disease.
Holds socialism seeks to satisfy wants by
political and not economic efforts, and would de¬
stroy individual initiative, invention and enterprise, along with energizing forces of millions of individ¬
uals in pursuit of their self interest.
Says nation is shot through with special privileges.
1,223,000 shares of
such
Liberty
President, The Foundation for Economic Education, Inc.
On Oct. 7, The Columbia Gas System, Inc., offered to its stock¬
holders of record Oct. 5, 1948, the right to subscribe at $10 per share,
custom in
£
By LEONARD E. READ*
.
for
(1541)
General Practitioners in
The First Boston Corporation inaugurates scheme for
was
CHRONICLE
or
GUARANTY TRUST COMPANY OF NEW YORK,
-
MONTREAL TRUST
Exchange Agent
COMPANY, Exchange Sub-Agent
10
(1542)
COMMERCIAL
THE
&
FINANCIAL
CHRONICLE
/aide
Black
Sivalls
&
Bryson, Inc.,
placed
privately
at jpar
through F. S. Yantis & Co., Inc.,
$3,000,000
of
3V2%
promissory
notes due Aug.
1, 1968, with a
group of insurance companies, the
Illinois Brevities
has
\
t.
A group of
underwriters, headed by Iialsey, Stuart & Co. Inc., and
including, among others, the following Illinois bankers, Mullaney,
Wells & Co.; F. S. Yantis & Co., Inc.; Detmer & Co.; Farwell, Chap¬
net proceeds being used in part
man & Co.; Ketcham & Nongard: Alfred O'Gara &
Co.; Mason, Moran
to retire $2,175,000 bank debt, the
&
Co.; Patterson, Copeland
remainder being added to work¬
Inc.;
Mullaney, Wells
&
Co.;
Kendall, Inc.; Welsh, Davis & Co.,
ing capital.
and Robert Showers, publicly of¬
Detmer & Co.; Martin, Burns &
tj;
:jj
fered on Sept. 22 an issue of $75,Corbett, Inc.;
Sills, Minton &
Of the 472,954 shares of no par
Co., Inc.; Mason, Moran & Co.;
000,000 Pacific Telephone & Tele¬
value common stock of Illinois
Alfred O'Gara & Co.; Patterson,
graph Co. 35-year 3%% deben¬
Power Co. reserved as of Aug.
Copeland & Kendall, Inc.;
tures,
due
Sept.
15,
1983,
at
14, 1948, for issuance upon con¬
Ketcham & Nongard, and Mc100.53% and interest.
versions of 5% cumulative con¬
H:
❖
Master, Hutchinson & Co.
'
19483567
*
writing
headed by Halsey,
group
Stuart & Co. Inc.
Oct. 6 made
on
public offering of $75,000,000
Pacific Gas & Electric Co. first
a
3%%
bonds, series R, due June 1,1982,
and
mortgage
refunding
at 100.517 % and interest. The net
proceeds will he used to retire
and to
utility
bank loans,
in
part,
the
$12,000,000
finance,
c o m p a n
y's construction
pro¬
Chicago invest¬
participating in this
offering are: A. C. Allyn & Co.,
Other
gram.
ment houses
The
Arkansas Western
Keystone
Steel & Wire Co., Peoria, on Sept.
24 approved an
increase in the
company's outstanding capital
stock from 625,000 shares to 1,875,000 shares for the purpose of
issuing to stockholders two addi¬
tional
shares for
of
record
Year
Ended
99,752
$0.38
per
term
a
R.
J.
0.51
per
214,428
0.82
per
0.91 per
307,049
6
1.17
three
Kavanagh, whose term
per
sh.
sh.
sh.
sh.
sh.
0.84 per sh.
quarterly.
Approximate Market 13%
to
interested
offering
of
(Chicago)
used
value
asset
the
selling
mately
price,
8.99%
value.
plus
of
8.25%
net
Cities
the
twice
market
value
of
Water
Dearborn 1501
•*
*
stock
mon
offered
Rights
of
$2,250,000
Telephone Co. first
mortgage bonds, 3%% series due
July I, 1978, was placed privately
through Paine,* Webber, Jackson
Corp.,
it
announced
was
Oct. 5.
Included
publicly
issue
Chicago, North Shore &
Milwaukee Railway
Stock
in
the
nationwide
of 134 underwriters which
group
5%—1952
offered
of
Sept. 30
on
an
$60,000,000
3% deben¬
tures due Oct. 1, 1973, and 260,000
shares
of
$100
value
par
4.50% series preferred stock of
R.
*
J.
expired
on
offered
were
through
$22.50
Hemphill,
Reynolds
Tobacco
The
stockholders
Co, Chicago,
Central
Brailsford & Go.
Republic
Co.
(Inc.);
Harris, Hall & Co. (Inc.); Bacon,
Whipple & Co.; William Blair &
Co.; The Illinois Co.; Kebbon,
S. La Salle Street
4
the
shares
common
of
Peabody
Oct.
on
5
in¬
number of authorized
from
2,500,000 to
4,000,000, and authorized the rais¬
ing
of
additional
000,
for
the
construction
program
ket conditions
j \
Central
RR.
when
the
mar¬
2%%
Co,
1,
due
Y,
semi-annually
to Aug. 1,
1949,
from
1957,
both inclusive, was publicly of¬
McCormick & Co.; Sills, Minton
CG
95
fered
on
&
from
and
Inc.;
net proceeds
the
Analysis Available
Farwell,
are
reduction
amount
of
pany's
Chapman
to be applied to
of
the
the
aggregate
tobacco
short-term
notes
com¬
out¬
& BRYSON
Common Stock
standing.
Both issues of securi¬
ties
BLACK, SIVALLS
offered
were
cipal
amount,
dividends
may
stock
at
plus
accrued
their prin¬
interest or
the
as
case
be.
'
Oct. 4 to Harriman
on
Ripley & Co. Inc., and Lehman
Brothers,
"City,
on a
both
of
New
bid of 99.092,
terest cost of
a
York
net in¬
2.34%.
The stockholders of Thor Corp,
Chicago, on. Oct. 18 will consider
approving a proposal to purchase
and
retire
company's
88,723
common
shares
of
Street'Chicago 4
to
Indiana
time,
the
Crampton
&
Detroit Harvester
Common
Steel
Metals Disintegrating
its
,
„
■
STRAUS & BLOSSER
Members New York Stock Exchange
Members Chicago Stock Exchange
York Curb
South La Salle St., Chicago 3, 111.
ANDover 5700
Tele. CG 650-651
*Prospectus
upon
A.
,
Hi
"
•.
methods and proposed changes in
Vice-President, said tha*
plant is expected to be
of great value in our continuous
new
for
products."
new
Ht
Hi
Inc., and Holley,. Dayton & Gernon,
of Chicago, on
Sept.
16
publicly offered at
share)
185,000
Sugar
Corp.
($30
par
shares
5%
stock
The
used
to
of
to
per
retail
$11,494,134.
same
week
gaip of 21.5%
Central
to
also
were
among
an
the
1948.
over
the
date
like
a
1947
-■•'
;'-'i
(Inc.)
Co.
3%
bonds,
100.79% and
interest.
H<
Hi
;
;
reports
net
ended
July 31,
1948, as against $144,972,640 and
$12,365,594,
respectively, in the
corresponding period last year.
hi
I
Car-
|
of
f
I
&
e r s
C 0,
Treasurer,
it
was
an¬
nounced
yes¬
terday followng the annual
meeting.
These
of
three
Dean
and
Witter
Jardine,
M.
J. Earle Jardine Jr.
directors
new
Incorporated
Chicago
New York
k
Boston
•
Milwaukee
<
John
and
B.
the
mentioned
investment
in
following
carry over for the
Rudolph J. Eichler,
Hill, Willis H. Durst,
year:
S.
Moulton
and
Robert
H.
Parsons.
The
club
successful
active
has
concluded
and
year
members
now
and
38
a
very
has
226
associate
members.
G. B. Takens Now With
participated
public
H. H.
in
(1)
to
BENTON
the
offerings:
Diffenderfer Co.k
(Special
earlier
The
Financial
HARBOR,
Chhonicle)
MICH.
Gerritt B. Takens has become
Kebbon, McCormick & Co. and
sociated
Minton
8
—
as¬
&
of
&
Co,
100,000
Corp.
Inc.,
on
shares
of
common
stock
at $14.50 per share,
Bought
Omaha
Walter
A.
The
will
with
H.
H.
Diffenderfer
Co, Fidelity Building. In the
past he was with Straus Securi¬
ties Co. and Alison & Co. and
ducted
ness
his
own
investment
in Grand Rapids.
—
Sold
—
Quoted
&
COMPANY
Specialists in Foreign Securities
'
208 S. La Salle St, Chicago 4, Illinois
.
Minneapolis
E.
hi
of
ZIPPIN
■
also
are
BONDS —SHARES
a.c.allyn™>company
Phillips
Co.
replacing
retiring.
are
Directors
ensuing
Ralph
&
Sr., Guy Witter, Gerald
Goodman
who
in¬
after charges and Federal
taxes, of $17,490,647 for
hi
p
Sand-
Vance
Francis
Co, Moline,
of $216,959,722 and
number
A.
Jr.,
Cary
#
&
months
John
ter,
(Inc.)
000 Indiana & Michigan Electric
•
Co,
President; Al-
|
Goodwin, |
Secretary; and :
issue of $25,000,-
due Sept. 1, 1978, at
H:?
Staats
ston, Hoffman
those offering
mortgage
FT
R.
Pur-
Co.
&
of Los
Jardine,
Wal-
for
*
Hall
Sept. 16
following
$20,-
ANGELES, CALIF.—New
C.
same
the
*
LOS
of
$102,602/i08,
over
Harris,
A
totaled
Angeles Bond Glub
bert
11,
24%
or
Republic
and
nine
stock outstand¬
Elects Jardine Pres.
kiss
period.
the
to
867,492
708,158, with current liabilities of
are.to
of last year, while for
amounted
income
the
and
Sept.
the 36 weeks ended the
come,
of
amounted
assets
1,
unsecured
sales
ended
were
sales
common
Current
pre¬
amount
on
Jr., of William
Co, Inc., Barrington
weeks
Deere
shares of
ing.
profit
share
per
Sarle
Holly
Aug.
proceeds
reduce
that
first
$2.85
the
the
Angeles are d.
cumulative
prior
net
Jewel Tea
Co.
$167,835,
in
After
the
on
officers of the Bond Club
preferred stock (convertible into
on
dividends
stock
Los
Lee, Higginson Corp.; Straus &
Blosser;
Sills, Minton & Co,
sales
ferred
provision
taxes.
$5,132,980.
by
Central
Republic
(Inc.), and including, among
others, A. C. Allyn & Co, Inc.;
four
deducting
after
income
H:
Co.
reports
Federal
$2,636,102
of investment houses
group
common
11.5%. Net profit amount¬
to
for
-Hi
E.
search
Gro¬
Corp, Chicago, for the fiscal
ended June 30, 1948, were
$125,379,518, a decrease of $16,320,551 from the preceding'fiscal
year, or
pipe
Staley Mfg. Co, Decatur
has completed a large new pilot
plant for testing manufacturing
"the
cumu¬
i!I
BRITISH
request
Metro¬
Consolidated
Southwestern Public Service Company
■
M.
Sept.
cers
ed
Hi
Hi
of
Public Service Company of Indiana,
Incorporated
Common
company,
of
sales
SOUTH AFRICAN
Montana Dakota Utilities Company
^Northern Indiana Public Service Company
Common
H.
on
of
/
Kentucky Utilities Company
Michigan Consolidated Gas Company
Minnesota Power & Light Company
Missouri Utilities Company
Common
135
of the
expansion
other
line system.
(par $2.50)
Michigan Electric Company
and
(Inc.)
shares
year
from
used
^Kansas City Power & Light Company
Kansas Power & Light Company
Texas Eastern Transmission
Tel.
be
along with
the entire net proceeds going to
Iowa Electric Light & Power
Company
Iowa Public Service Company
Common
Member New
(par
resources
for
Verney
Florida Power Corporation
Florida Power & Light
Company
Tele. CG 146-7
Co.
:!i
Net
Sills,
-
interest;
&
40,000
Sept.
Central Illinois Electric & Gas Company
Central Illinois Public Service Company
Members of Chicago Stock Exchange
Associate
&
per
the
stock from the
and
of
of
The
;
to maturity. The issue had been
awarded
PUBLIC UTILITY PREFERRED STOCKS
William A. Fuller & Co.
Portsmouth
Wells
shares
$5
paragraphs
Winters &
400,000
at $30.25 per share.
bankers
Tel. Dearborn 5600
Mullaney,
of
1.50% to 2.45% according
Co.,
& Co.; Julien Collins & Co., and
Ames, Emerich & Co., Inc. The
Oct. 5 at prices to yield
30
Sept. 28 publicly offered
on
issue
*
equipment
457%
Byllesby
politan Edison Co. 4.35%
suitable.
are
certificates, series
$180,000
Feb.
for
"• ' • .
issue of $3,240,000 Illinois
An
trust
capital
to exceed $10,000,completion
of the
not
company,
bonds due Sept. 1, 1978, at 102.-
Cen-
short-term bank loans.
Coal
com¬
lative preferred stock (par $100)
at $102.25 per share and divi¬
dends.
be
■
of
(Inc.); Bacon, Whip¬
Pierce, Fenner & Beane, both of
*
purchase
Kebbon, McCormick
Co.;
&
New York
Co.*
following
Chicago
bankers: A. C. Allyn & Co., Inc.;
•
209 S. La Salle
and
(Inc.); Harris,
1958).
City.
bonds,.5%
(with five-year
Edison Co. first mortgage 3 Vh
%
Co,
others,
among
Noyes & Co. and Merrill Lynch,
*
the
were
9868
per
of warrants.
the public at
share
per
Commercial
National
The balance, amount¬
and sold to
Illinois
com¬
subscribed
were
subscribe
to
Sept. 15.
vision and allied fields.
the
of
the exercise
primarily in securities
enterprises engaged in tele¬
com¬
Co., Chicago, at $20.50
on
&
Y,
N.
headed
to
stockholders
mon
se¬
Weld
York,
Republic Co.
A
*
-
119,217
issue
mortgage
series
A,
Of the 128,230 shares of
share,
Public Utility
CHICAGO
first
bonds,
for
of
including,
trol
Co, Inc., New York, N. Y.
based
the
White,
New
headed
plant layouts. E. K. Scheiter, Ex¬
Illinois
fund
1963
for
stock attached) at 100 and
interest; (3) William Blair & Co.
on Sept. 23
of $12,000,000 Ohio
Securities
& Curtis and Stone & Webster Se¬
Corp.
State
Co.
fund
creased
Tel.
redemp¬
$1,250,000
Tea
on
208
of
curities held in the Fund's port¬
folio. The net proceeds are to he
curities
,
the
in
asset
daily
and
of
net proceeds will
be
treasury
treasury.
syndicate
Webster
&
3%%, due May 1, 1973, was placed
privately through J. G. White &
of
The price of the shares is
determined
issue
sinking
approxi¬
or
the
Corp.
both
ecutive
the principal underwriter,
An
Teletype CG 955
Common
used
will
the
ing to 9,013 shares,
CHICAGO 4, ILL.
Income
proceeds
due
warrants
*
*
banking
Stone
(Inc.); Farwell,
reimburse
to
An
price normally equal to the
a
A
by
share)
A.
tion of the preferred stock.
was
available
COMSTOCK & CO.
Central
net
funds
for
Fund, Inc.
stock
common
The
series
mon
common
of
(Inc.); Bacon, Whipple &
Byllesby & Co.
sinking
gage
:
Tennessee Gas Transmission Co.
Co.; William Blair & Co.; H. M.
ex¬
own
*
.cash
Co.
Inc.;
from its
come
time
&
2,500 000
of
Television
201 to
Co,
$26.50
bankers:
annual interest rate not exceeding
3.75%, with the balance of $497,-
an
Chapman & Co. and The Illinois
shares
dealers.
231 So. LaSalle St.
re¬
1948.
group
Chairman, and allied inter¬
a
cost of $1,497,201, or
$16.87V2
per
share., To finance
the
purchase,
the
corporation
plans to borrow $1,000,000 at an
Central
Co.
&
invested
Current dividend $0.20
bulletin
Chicago
Becker
Co.
on
Descriptive
a
Gilbert
Verney,
President
of
Verney Corp, the selling stock¬
holder; (2) Central Republic Co.
(Inc.) on Sept. 22 of $6,300,000
Alan Wood Steel Co. first mort¬
iate
&
shares
at
icl
ests, _at
Republic Co. (Inc.); Harris, Hall
to succeed
years
offered
through
following
G.
director for
a
the
17,
156,896
Jtiuney,
ple
such
underwriters which included the
pired.
Months Ended June 30
220,133
elected
was
of
1.
publicly
share
per
to
Sept.
in.
Hall & Co.
316,058
upon
prior
date,
remaining
were
E.J.
.net
238,825
133,336
The
held
shares will be issued Oct. 15.
at
■_*.
demption
new
Sommer
Oct.
issued
were
conversions
Sept. 8 through securities
dealers, according to Television
Shares Management
Co., Chi¬
GROWTH—
$
share
each
The
as
cago,
Profit
shares
of
made
Company
Common Stock
Net
vertible preferred stock,
*
shareholders
Public
Gas
*
-
under¬
nationwide
Another
Thursday,-October 14, 1948
JLuWdxa
ui
Telephone Randolph 4696
Teletype CG 451
con¬
busi¬
To Attend
Hemispheric Stock Exchanges Parley
CHRONICLE
(1543)
11
State of the Nation's Business
Exchanges, to be
held in Santiago, Chile, from Oct. 26 through Oct. 29, will be attended^
by Howland S. Davis, Executive Vice-President of the New York
Hemispheric Conference of Stock
Second
The
FINANCIAL
&
COMMERCIAL
THE
Number 4742
168
Volume
By WALTER J. MATHERLY*
Dean of College of Business
,
Dean
Matherly outlines
Administration, University of Florida
chief factors in state of nation's business: (1) price inflation; (2) attacks
as
'
private enterprise system; and (3) America's responsibility in international economic
our
on
Sees remedy
struction.
for inflation in bringing production and goods into balance with
recon¬
supply,
money
and lists, as action to strengthen system of private enterprise, reorganization of labor-management
lationships, revitalization of small and medium-size undertakings and readjustment of taxation.
international economic affairs, says U. S. must sacrifice some of its preferred position.
re¬
In
To present the state of the nation's business it is necessary to begin with the past,
gather up the present and to carry the results on into the future.
The past is the pres¬
ent of yesterday—a million yesterdays.
While the past affords us many valuable lessons
to
which
each
of
cannot afford
to live
Francis
A.
A.
Hans
Truslow
Widenmann
We must
Stock
New York
Carl M. Loeb
Co., who will represent the Association of Stock Exchange
Exchange,
Francis
Adams
President,
Truslow,
not
wholly in the past.
accept the world
it
as
once
Curb Exchange, and Hans A. Widenmann, a partner ot
what
what
as
it is,1
do
must
is
Rhoades &
We
was.
was
Firms.
Delegates from all
will also
South American Exchanges
be
present.
required of us today, not
required of us yesterThe
French
statesman,
day.
state
der in
disclosure of corporate
for
the
next, the Robespierre the next.
He governs in the past.
And the
result .is he neglects the present,
even though it is right in front of
The First
Conference, which was held in New York in September,
1947, was attended by delegates from 24 exchanges representing 11
countries in the Western Hemisphere. The discussions, at that time,
centered upon trading regulations and practices of the various ex¬
changes, foreign exchange controls, and the international movement
of capital.
■"
.'V"'
....
.
.
He
takes
one
himself
day,
duced finds
Danton
cemetery.
ket.
his nose."
Steps Proposed to Counteract Dangers in Huge
Public Debt
We cannot afford to imitate that
Roberts,
urges
^
•
system, with resistance to pressure groups.
for
eyes;
three
where
it
had
reasons:
not give a
going, and
interested only in
it
was
it
alleged al¬
It
flew
first,
to get dust in its
it
second,
third,
,
the risk of "boom and /bust," the smother¬
he
de¬
backward.
damn
where
Dilution of the dollar,
which
and
flew
it did not want
Calls for reform of tax
and restoration of flexible interest rates.
did
was
Wise
been.
men
judge the futufe by the lights of
the past buttftey do not dwell in
ing of free enterprise, and loss of human freedoms are the dangers
our huge Federal debt, according to the seventh and final
the past; they dwell in the pres¬
study of the Committee on Public Debt Policy, made public Oct. 8. ent.
They merely utilize the past
to interpret
the present and to
men! services, the committee de¬
forecast
the
future.
In
the
inherent in
clares.
inflation
provide
high
the
because
with
us
at
reme¬
present
supply
of
in circulation has increased
rapidly than the supply
more
of
physical, goods, due partly to in¬
to
ernment
for
can
we
cuts
cumulated
me
.The
mean.
estimated
that
for
gross n^tjonal product
deductions are made
194^.the
before
since
and
.
has
ernment
for
the
illustrate what I
United States Gov¬
during
Let
war.
ac-
any
depreciation on capital and
depletion of natural resources
for
exceed
will
$228,000,000,000.
If
in
committee
we
have
the language of Winston Churchill, "If we convert these 1947 dollars into
gov¬ the
past continues to quarrel «• with, 1939 dollars, we find that $228,hope to the present there is not hope for 000,000,000 will amount to only
bill
our
the
warns
that
un¬
iting the scope of federal power
in the scheme of things, the tend¬
Price Inflation
is
a
will be to go
product of the past is
on adding one
that i, of
price
inflation. While
another, not only there are other
influences,
the
making more difficult the problem fundamental causes of
price infla¬
of National debt management, but
tion are of two kinds:
ency
function
also
after
"leading
the individual
W. R. Burf ess
Specific
George
remedies
B.
called
Roberts
for
by
the
study are effective control of
the
national
budget, reduction of
the debt and its distribution
widely
than
more
investors
rather
the restoration of
among
banks,
flexible
interest
rates
and
the
building of a dynamic economy.
The
committee', composed
of
leading bankers, educators, econo¬
afield' from
far
us
(1)
liberty and democ¬
which
Changes
money.
this
the
in
supply
of
If the amounts of money
country has
in circulation, including demand
been
built."
Those
seeking
to
deposits, increase, prices rise pro¬
change the form of our govern¬
vided changes in the supply of
ment have been alert to exploit
an
instinct becoming common in goods and services do not occur.
racy
on
all classes
"run to
to
at the first
sign of
a
government
serious prob¬
lem."
the
greater the supply of money
higher the prices. This situa¬
tion
"Costs
not
The
of
national
defense
are
explains
what
our gross
money
The state of the nation's business
which
happened
in
the United States in the great in¬
foreordained,":
says the com¬
flation from 1915 to 1920, what
"They are matters of pol¬
icy, planning and execution, hence happened with the issuance of
mists
and insurance
executives,
are
adjustable ! according to how greenbacks during the Civil War.
with a staff of advisors, has been
we
conceive and "carry out our and what has
happened since 1940.
studying various phases of the
program.
Success depends not o-n
The supply of money in the United
problem for two years v/ith a view
how much we spend, but on how
to formulating a sound plan for
States
as
measured by
demand
This is equally true of
debt management. The final study, wisely.
the program of economic aid
to deposits and currency in circula¬
the work of W. Randolph Burgess,
countries.
Too
much tion in June, 1940, was $40,000,Committee Chairman, and George foreign
money,
instead of speeding the
B.- Roberts, summarizes the find¬
000,000.
By June, 1948, this sup¬
return of other countries to a selfings in the previous chapters and
ply had increase to $108,000,000,sustaining basis, can actually in¬
outlines specific recommendations.
000 or more than two and onecrease and prolong their depend¬
On
the
subject of budgetary
ence upon us."
half times, while the volume of
control, the committee says: "At
a time like this, when national de¬
Noting that the cost of veter¬ physical production, except for
fense
and international
aid are ans' pensions and benefits now ex¬ war goods and recently except for
ceeds $6 billion annually, the com¬
taking so many dollars, we should
foodstuffs, increased very slowly
be exerting every effort to keep mittee says that while these pro¬
mittee,
or
Bollarwise or in terms of
national product
prices.
philosophy of lim¬
a
will buy goods
worth only $144,000,000,000 at 1939
$144,000.000,GOO
future."
services."
government
The
less
do,
adequate
has increased
152%
what
over
it
1939 -but
physical-goodswise or in terms of physical out¬
put it has increased only 59%.
To solve the problem of price
was
in
inflation
one
the
or
other of two
basic things is necessary:
must reduce the
First,
supply of
we
money
in circulation by control of bank
loans and retirement of govern¬
bonds
ment
continued
through
high taxation or otherwise and
thereby decrease that supply from
increase
152%
second,
or
of
volume
from
increase;
the
production
expand
must
physical
increase
59%
crease,
59%
to
we
in¬
152%
to
thereby bringing the
sup¬
ply of goods and services into line
with the supply of money in cir¬
Of course, both of ihese
culation.
could
ends
be
sought simultane¬
result thereof
bring the supply of money and
the supply, of goods together at
some
intermediate
point.
Any
ously
and
other
as
of
cures
which
tined
to
inflation
price
prescribed
are
either
a
fail,
the
des¬
are
what
matter
no
Republicans
the
or
l
down
spending
tions."
The view is expressed that
in
other
direc¬
in the $39 billion budget for 1949
"there are vast opportunities for
grams
a
ployment
than
Reduced
Reducing
the
budget
is
not
merely a matter of -more efficient
performance of existing goVern-
or
at
a
been content to draw their unem¬
economy
Government Activities Must Be
great
rate far below the rate
have been abused by increase in the supply of
minority of veterans who have in circulation.
and the
if only the government
public, which in the long
run determines
government poli¬
cies, are so minded."
accomplished
have
good, they
take
compensation
acceptable
Two-
thirds of the veterans being cared
for
under
the hospitalization and
medical aid
program
said
are
too
disabilities,
liberal,' appraisal
(Continued
and
on page
Changes
goods and
of
money
period
in
the
supply
of
in their campaign pyro¬
or
have
1948.
to the
say
is
in
any
m-
address
by Dean Matherly
54th
Annual
Conven¬
of
the
Under
nation's
It
main would
to exist.
cease
of the people would,
government employees,
majority
function
as
j The entire economic system in its
basic aspects
would become a huge
and
state-operated
enterprise...; It is this kind of sys¬
tem which
Prime Minister Cle¬
ment Atlee and hist Labor Pai;ty
have already introduced into Eng¬
land in part, beginning with the
"Old
Lady
of
Threadneedle
Street"—the Bank of England.
state-owned
Communism, which is supreme
in
Russia
which
and
is
is
collectivism
complete
the
of
control
economic
the
on
march in other parts of the
world,
state
or
order in
it, if adopted in this
individual freedom inaffairs would
entirely
disappear. No private property of
any kind would exist.
Each in¬
full.
Under
country,
economic
woiild
dividual
and
be
according
produce
consume
receive
to
or
to
ability
expected
to his
ac¬
The right to
goods would be a right equally
enjoyed by all. Some communists,
take the postion that collectivism,
would be applied in other realms.
cording to his needs.
use
If
family
the
so,
the
and
indi¬
vidual home would disappear; the
people would dwell together in
public barracks; children would
be reared in public nurseries, and
food would be served in public
Above everything and
cafeterias.
permeating everything would be
the
state
or
government.
The
party organization,
communist countries
shadow state within a state
communist
which in all
is
a
made up of the few.
and which is
rather than of the many
bottom, would
rule the
at the top
the
at
people with an iron hand. Unlike
state
socialism,
communism
is
based
be
or
a
action
direct
upon
would
tion
and
inaugurated by revolu¬
series of revolutions
rather than evolution.
Fascism, which is a .curious ad¬
of ancient autocracy and
Fire
form
busi¬
rise
not only that "of price
from
are
those
in-
of private
The system of private
enterprise is under fire
borders
use.
so
private industry. Profit
by
many
—
quarters.
within
who
right of kings, in another
divine
II
Enterprise
in
unchanged,
done
inaugurated,
mixture
Private
ness
own
its ad¬
vocates, claim, not by revolution,
but by evolution or by a process
of gradual adoption through the
regular
legislative
channels of
government.
The
government
would do most of the things now
con¬
trary.
fire
:;:An
to
capitalism.
circulation
plat¬
party
flation^ but also that
remains
before the
their
services. If the supply
while tion of the
Kentucky Bankers As¬
credit sociation, Louisville, Ky., Oct. 4,
38)
forms
technics
The' state
to
be under treatment for non-serv¬
ice-connected
(2)
rather
jobs.
in
Democrats
of
money
be
his
for
owner
would
A
scarcities which
."Only
by reducing
number of things we ask the
make
tributing economic goods. It may
permit
considerable
individual
freedom and even may allow pri¬
vate ownership of goods held by
and
and to
or¬
It demands govern¬
ownership and operation of
all the basic
means
of produc¬
ing and to some extent of dis¬
in the
partly to increased demand at
economic
part.
creased demand for things abroad
home
of the
control
ment
the
of
causes
Prices
.
of
prices
to the fundamental
as
therefor.
are
backward
budget control, debt reduction and redistribution,
dies
money
Northwest
the
result
a.
fundamental
price
clue's
and
withheld
are
as
or
otherwise,
unaffected.
be
f111 bird, which fabulous old Paul
of
they
market
monopoly
will
mar¬
produced
are
if
or
the
from
Itsfway into the
goods
hoarded
Bunyon
scribed
under aegis of W. R. Burgess and G. B.
we
can
afford to imitate the notorious fly-
ways
Public Debt Policy Study,
If
The
French statesman. Neither
are
,
once speaking of another since one set of forces exactly offIncreased pro¬
statesman, remarked: "The sets the other.
trouble with that statesman is that duction,
however,
will
affect
he knows history.
He lives in a prices only when what is pro¬
Mirabeau
systems
.
Briand,
information, and legal aspects of the securities
are
These
America.
French
business.
which
and —systems
agenda for this year's meeting includes discussions of eco¬
nomic and financial developments, listing securities of Latin-Ameri¬
can companies on United States stock exchanges, standards for public
The
alien
to
of
three kinds: 'first, state socialism;
second,
communism; and third,
lower the level
of prices.
If fascism—a mouthful of big wordy
money forces and the volume of which requires a brainful of big
physical production, increase or understandings.
decrease at the same rate, the
State socialism is a species of
level of prices remains the same, middle-ground
collectivism
or
of goods
To services and their flow into the
live wholly in the past is to live
| market will lower prices. The
blindly,
aimlessly,
ineffectively, greater the supply of goods, the
or
Howland S. Davis
may learn, we'f
worship the past creased production
us
to
would
our
came
of
the
into existence with the
Fascist
and the Nazi
is
an
time
to
time
under
from
wide acceptance
national
system altogther and who would
substitute therefor other systems
in- Italy
old, old concept. It was
miliar to Plato and
There
abolish' this
slate
state in Germany; It
Under
fascism
in
fa¬
Aristotle, and
has
many
the
received
quartern.
individual,
apart from society, has no mean¬
ing; he is not a human
(Continued
on page
being at
34)
12
THE
(1544)
COMMERCIAL
all
of
&
the
institutions
indicated
Bank and Insurance Stocks
FINANCIAL
to
have
earned
their
ments
during
listed
the
Thursday, October 14, 1948
are
than
more
dividend
CHRONICLE
require¬
first
nine
months.
By H. E.
The present indications are that
JOHNSON
the
This Week
The
changes which
—
rates, volume
of loans and reserve requirements, so far this year make the recent
statements of the New York City banks unusually interesting.
In the
have
taken
place in
money
first place, these statements show
how the various banks
are meeting the problems of reserves and demand for loans.
In the
second place, and more important from the standpoint of the stock¬
holder, they indicate what effect these various factors are having
on earnings.
Despite these successive increases in reserve requirements in
February, June and September which considerably reduced available
funds, outstanding loans continued to rise in most cases. The higher
reserve
requirements were met by the liquidation of government
.
"+ J As.to earnings, results were generally favorable when compared
witji the like periods of 1947. The increase in interest rates on com¬
larger
loans, and short-term government securities, as well as the
volume of .loans outstanding, more than offset the loss of
income
bank
earnings
will
remainder
the
present
of
results
reason
operations
be
1948.
for
and
during
For
the
this
full
year
from the securities sold to obtain additional
reserves.
: While most institutions do not issue interim
operating state¬
ments, an indication of earnings can be obtained by a comparison of
the changes in book values at the various dates.
Presented in the following tabulation are the net indicated earn¬
ings on a per share basis for 16 New York City banks'. The periods'
covered are the "third quarter results for 1947 and 1948 arid the nine
NEW
should be favorable in comparison
with previous periods.
Note
The
—
based
was
column
on
held
Are
Vice-President—Macrery B. Wheeler, Wheeler & Woolfolk, Inc.
"Fire
Insurance
Stocks
Investment
Insurance."
'•
Through
inadvertence,
Sec.-Treasurer—Geo. H. Nusloch, Nusloch, Baudean & Smith.
Delegates—Joseph P. Minetree,, Steiner, Rouse &
liam Perry Brown, Newman, Brown & Co.
Alternates—R. J.
mention
text
& Arnold.
not made of the fact that the
full
of
the
article
on
meeting of the New Orleans Security Traders' Association
Oct. 5, 1948 the following officers were elected:
written
by Shelby Cullom Davis of Shelby
Cullom Davis & Co., under the
caption
SECURITY TRADERS' ASSOCIATION
a
President—Jackson A. Hawley, Equitable Securities Corporation.
article
an
ORLEANS
At
Sept. 23
of
was
securities.
mercial
fundamental factors in¬
same
fluencing
Bank Stocks
had
Wil¬
and
Glas, Glas & Co., and H. Wilson Arnold, Weil
-
.
.
Co.
'
.
>
been
published in the August edition of
"The Chicago Letter" .issued by
Carter H, Harrison &
Co., Chicago
We regret this oversight.
4, 111.
-
month's total for the two years.
Also shown is the percentage change
in earnings for the two periods and the present annual dividend rate.
Net Indicated Earnings Per Share
""".
+ >:
:
•/
\fsV <'.V-
'
Third Quarter
V;yvvV v?
1948
Bank of Manhattan._
Bankers
Central
1947
0.69
Chase National
0.69
1.50
1.50
0.63
_____
2.32
0.61
Chemical Bk. & Tr.__
0.75
Commercial
0.75
0.83
1.25
18.68
First National
r_
1.80
+ 20
4.00
1.69
1.92
—12
."
2.23
2.07
+
8
1.80
'•
2.46
—10
2.57
3.70
6
60.79
+
■
2.00
1
2.80
+ 4
58.18
—
4
—
Guaranty Trust
4.48.
3.92
+ 14
13.66
13.66
[rving Trust
0.30
0.29
+
3
0.90
0.85
+ ~6
0.80
3.40
+ 11
2.40
7
8.00
—14
1.60
Manufacturers
Trust
New
York
Public
1.18
7
3.77
+
8
12.17*
0.78
5
2.29
1.69
1.70
—
1.06
10.50
_________
8.31
11.34
1
4.83
3.56
3.13
+ 26
29.35
26:43
1
4.00
+ 14
2.00
+ 11
35.00
—
share to
per
a
re¬
It
should
he various
be
mentioned
banks.
above include
In
results
that
some,
from
cases
the
of
has
become
.Tucker, Anthony
Co.," 120 Broadway, New York
City, members of the New York
Stock
Exchange,
of
municipal
department, it is announced. Pre¬
viously, Mr. Peine had been with
White, Weld & Co.
the
firm's
Mr.
New
Peine's
as
manager
York
association
Jackson
A,
Hawley Macrery
securities.
The
Chronicle" of Aug.
with
12.
The
Quarter
Central
to Meet
Century
Hanover
Bank
,
Club
of
Trust
&
Company will meet tonight (Oct.
14) at the Hotel Roosevelt.
300
been
the
in
to
attend
About
women',, who
and
men
employ iof
the
dinner
have
the bank
expected
weakness
in
the
which
S.
is
and
held
enter¬
of
wick
is
Those few banks which do report operating earnings,
the
club.
the
Charles
retiring
'
dent.
:
mem¬
Swan-
Club
Nelson
conservative.
the
are
the Association that officers succeeded themselves.
At
this
meeting plans
were
be
in
NSTA
HEAR
held
in
Dallas
®
,
Roy
nati
C.
Nelson,
President
of
Browning & Co.,' Cincin¬
investment
TO
DeGOLYER:
E.
?'
firm, died Oct. 9
L.
Bulletin
the
EVENTS
Investment
Members
New
York
Stock
Established
180 BROADWAY, NEW YORK 5, N. Y.
Telephone:
Bell
BArclay
Teletype—NY
(L. A. Gibbs,
18 Clinton
7-3500
N. Y. Phone—REctor 2-4383
Manager Trading -Dept.)
Group of Investment
Oct. 28, 1948
(Boston, Mass.)
•
annual
Harvest
Party,
at
(Chicago, III.)
of Chicago
Traders Club
National
NEW YORK
HUbbard
'
BS-297
CLEVELAND
15
LOS
PRIVATE
7644
WIRE
MICHIGAN
SAN
14
SYSTEM
CONNECTING
TELEPHONES TO
:
:
Hartford, Enterprise 6011
Enterprise
7008
Buitding
YUKON
2837
ST. LOUIS,
FRANCISCO 4
Russ
6-2332
SF-573
NEW
YORK, BOSTON, CHICAGO,
LOS ANGELES,
Association entertainment for del¬
egates
coming
later.
,
to
/ >•;;
Dec. 5-10, 1948
NSTA
from
vention—details
be
Aldred
of
lec¬
Technology
University in 1939, and Clark Vanurem lec¬
as
1941.
During 1940 he
Distinguished Professor of Geology at
TRADERS
•
^
>'
ASSOCIATION
Hotel Kenmore on Oct. 28.
Gilbert M. Lothrop,
Co., is Chairman of the Committee.
>
;v"'
/. :
:/:'■(
■.
competition will be the "last word" in. the Golf Tourna¬
scheduled for the first day of the November Convention at
Johnny Cornell, Dallas, Rupe & Son, Chairman of the
discovered recently that "Doak Walker of
won't be available. Too, the Dallas
crowd have been hearing rumors that there are some pretty ?good
meet
though
even
Southern
he
Methodist University"
golfers in Houston so that it looks like a pretty solid front will be
hand from the Texas groups.
Texans
Club
has
caddies
Con¬
announced
are
known
fair
ordered
have
Texas", until
been
the
their fair play
for
to
sunny
instructed
19th
hole.
not
And
so
that the Dallas Bond
weather for the occasion.
Also,
to give out with "The Eyes of
to further demonstrate our "fair
play," all' handicaps will be figured under the Calloway
System of
:
(Hollywood, Fla.)
Investment Bankers Associatlor
1948 convention at the
Beach Hotel.
was
Institute
Dallas Golfers expects to have one of the strongest foursomes in the
Security Traders
SAN FRANCISCO
Portland, Enterprise 7008
Detroit, Enterprise fiOfifi
ment
on
Orleans
7535
CG-105
LA-1086
PHILADELPHIA,
Providence,
FRANKLIN
3-0782
ANGELES
Nov. 18, 1948 (New Orleans, La.)
New
210 W. Seventh Street
CV-394
CLEVELAND,
231 S. LaSalle Street
NY 1-2875
Schofield Building
SUPERIOR
WHITEHALL
2-O650
Security Traders Asso¬
ciation Convention.
67 Wall Street
10 Post Office Square
DeGolyer
at^ Massachusetts
Keen
Dallas, Texas.
(Dallas, Tex.)
CHICAGO 4
5
Mr.
TEXAS BOYS READY TO "TEE OFF"
of NSTA
to the Convention.
Nov. 14-18, 1948
years
groups.
1929; Cyrus Fogg Brackett lecturer at Prince¬
SECURITIES
BOSTON
W. E. Hutton &
passing through Chicago on way
9
distinguished
This
considerable amount of time
The Boston Securities Traders Association will hold their annual
Luncheon for members
INCORPORATED
Industry" to members and
NSTA.
the University of Texas.
E. L. de Golyer
Boston Securities Traders Asso¬
ciation
Bond
GEVEft & 00.
the
Nov." 16,
Mr. DeGolyer will talk
turer at the same school in
ing at Hotel Pierre.
Nov. 13, 1948
BOSTON
Natural Gas
past 20
ton
harvest party at the
BANK and INSURANCE STOCKS
„
MacNaug'hton, Dallas, Texas will
at the Corporate Forum,
speaker
lecturing and speaking before
in
the Hotel Kenmore.
WHOLESALE MARKETS IN
consulting
firm of
the
a
served
St., Newark 2, N. J.
of
member
Security Traders Association,
"The
turer
1891
MArket 3-3430
1-1248-49
INDUSTRY"
GAS
famous
speaker has spent
(New York City)
New York
Exchange
senior
'delegates N>f-
Field
Bankers Association annual meet¬
Rippel & Co.
world
the
Oct. 14, 1948
J. S.
DeGolyer,
guest
various
Laird, Bissell & Meeds
NATURAL
the Baker Hotel, at 2 p.m.
SECURITIES
request
on
"THE
geologist and
DeGolyer and
on
In
New York City
Banks
con¬
November, who will return, by way
of New Orleans to be, the
guests of the members of the New Orleans
Security Traders? Association.;
:
;
COMPARISON
NEW JERSEY
the entertainment of
for
Security Traders' Association, Inc.
COMING
19
discussed
the delegates to the National
National
&
were
the
This, incidentally, is the first time in the history of
1948-1949.
year
be
ANALYSIS
Arnold
Wilson
H.
officers, delegates and alternates that
same
at the age of 50.
QUARTER
Glas
elected for the year 1947-1948, the same
having been re-elected for
Presi¬
..'.""'I ,v
Roy C. Nelson Dead
Bankers Trust, Chase National, Guar¬
anty Trust, Manufacturers Trust and National City all reported op¬
erating earnings for the 'first nine months higher than a year ago.
As can be seen from the above figures the dividend policies are
exception of First National and U. S. Trust,
J.
vention to
generally
showed favorable comparisons.
These
Gray, Jr., President of
bank, will address the
bers
R.
Perry Brown
annually.
higher earnings,
3rd
Nusloch Joseph P. Minetree
H.
Central Hanover Quarter
Century Club
William
government bond prices earlier this year, as a result of the lowering
of support prices, reduced the indicated net for a number of institu¬
tions. Even taking this factor into consideration most banks showed
With the
Wheeler George
B.
Tucker, Anthony & Co. was pre¬
viously reported in the "Financial
Wm.
accounting practices differ among
the net indicated earnings shown
sale
Peine
&
tainment
flncludes earnings of City Bank, Farmers Trust Company.
'
A.
with
for 25 years or more are
of $1,000,000 equal to $5.00
building expenditures.
for
+
4.87
+ 16
—
^Before transfer
serve
12.00
2.65
1.23
Trust__,_
National
U. S. Trust_
+
3.56
0.74
_____
1.10
3.86
Morgan (J. P.)
National Cityf
Charles
80.00
—
3.74
•
Mgr.
Forfncker, Anthony
associated
1.60
+ 14
17.59
National
Exchange
1.94
4.50
3
+
1.25
Corn
0.66
.
.++;
Annual
Change Div.
+ 17
$1.41
$1.20
4.50
__
"
.
%
1947
Change 1948
$0.48
+ 19
$1.65
$0.57
Trust
Hanover
..
Nine Months
%
G. A. Peine Mun.
Hollywood
Automatic Handicapping.
*
.'Each of the
for
28 affiliates
the feature event
Quotation
is eligible to submit
a
four-man team
with the winning team receiving the National
Bureau, Inc. Inter-City Team Trophy.
This trophy, a
sterling silver Paul Revere bowl, is held for one year
beautiful 12"
Volume 168
THE
Number 4742
COMMERCIAL
by the winning affiliate and each member of the winning team is
a small replica of this bowl.
The Union Bank & Trust
Company of Los Angeles will present a
trophy for the individual low gross. Any member of an affiliate
attending the Convention is eligible to compete for this prize. And,
too, any member playing on ah Inter-City team is eligible regardless
A
;
attractive
very
vt
FINANCIAL
CHRONICLE
Natural Gas
given
of his team's score.
&
(1545)
13
Company Stocks
By GEORGE A. BUTLER, Partner, Bdtler, Moser & Co.
Investment analyst gives data
on natural gas industry and on market action of gas
stocks. Says these shares have acted marketwise better than average.
company
r,
prize will be given by the Blue List for the
men golfers.
' 1
\
Additional prizes ranging from a Texas steer to a list of telephone
numbers will be presented by the Dallas Bond Club for the numerous
Natural gas companies sold
3,458,457,000,000 cubic feet in the 12 months to July 31,
compared with 3,035,992,000,000 cubic feet in the 12 months to July 31, 1946, an increase of
13.9%.
Operating revenues for the two 12 month periods were $794,007,078 and $710,303,-
other events
175,
best
,
score
of
municipal
,
.
Golfers
being arranged.
urged to send entries along with registration.
are
golf and registration entries may be mailed to either Johnny
903 Kirby
Building
or
Both
increase of 11.8%.
an
In
spite of a 14.5% rise in total operating expenses from $426,850,884 to $488,694,220, and a 10.6% increase in taxes from $88,180,178 to $97,514,036, net income
rose 2%
to $148,447,783 from $145,546,878.
Cornell,
to Carroll Bennett, same address.
*
Members of the
Golf. Committee
are:
Judson James, James
Stayart, Inc.; Winton Jackson, First Southwest Co.; Nelson
The two most important advantages of natural gas over other fuels are well
recognized today—cheapness and cleanliness.
Another advantage of great impor¬
&
Waggenjer,
Walker, Austin & Waggener; Lewis Rodgers, Central Investment
tance is the low labor cost in relation to gross revenues.
(j?o.
"
Natural gas pipe lines total at the present time some 230,000 miles, and in
of the steel shortage bid fair to show considerable increase over the next
.
years. :
Pipe line projects appro ved
will cost
few
pending with the Federal Power ^Commission; j
increase transmission capacity by nearly 50%.
or
billion dollars and
over One
spite
The growth of the industry is well illustrated by the fact that! total natural gas
sales increased 135.6% from 1935 to 1947.
'
:
.
j!•.'<':\V.
!
V '
It would appear that common stocks of natural gas companies have been meeting
increasing favor, as shown in the accompanying tabulation. A record of natural
with
March 26,
added to
from time to* time until it now comprises 42 issues.
George A. Butler
It can be seen from the tabula¬
tion that from the time-records first began to be kept of the different issues up to
BepL 22, 1948,- 30-showed increases, 7 declined, and 5 no change. :The tabulation illustrates.as well, that
the New: York "Times'' average of 50 stocks taken on the day of the first recording of the gas company
stocks, and;compared;with the average on Sept. 22, 1948 shows 18? increases and 24 declines*^
'.'/%■
-v" Comparing t the - action > of the natural gas company stocks on ? Sept. 22, 1948 and the date -fixst
forded with the- New York "Times'' 50 stocks average in the same way. we, find, that 33 of the 42 nati|rial
gas company stocks .behaved.better marketwise than the averages.t
. V.wy
V;
.There would seem to- be little question but that natural gas Company stocks have acted better than:;
the general maiket; as pictured by the New York "Time^AV®t|tge; of 50 stocks.
^1- We feel that this i^ .likely to continue:as mpre people.begin ^appreciate the opportunities-for vappEeciatibn and. stable - income -return that exist in the common stocks of the rapidly growing naturali gb^
gas (some natural and manufactured) companies has been maintained since
1947.
At that time the records of 11 companies were kept.
The list was
.
.
■"■■=;;.'jliVU-Z V-'Z-
Z. }VZ.: I
industry.c::-;
natural
gas
V:v\-v
v:,"'-"'>...■•■v
companies,•1
Net
Date
are
shown brushing up on their
putting at) the Dallas Country Club. From left to right; Nelson Wag¬
goner, of Walker Austin & Waggener; Judson James, of James &
Stay art; Win ton Jackson, First Southwest, and Johnny Cornell, of
Dallas Rupe
O
O
.
-
Atlanta Gas
O
Central
Columbia
Gas
Commonwealth
Consolidated Gas
Consolidated Natural
Cumberland Gas
V
H'-"
;,v'
"•
-
my * v.*
:
0
:
!
VI
O
? o-
;j
; o
.
1
•
Recorded
9/22/48
Stock
Average
117.1
116.6
117.5
116.6
115.9
116.6
112.8
116.6
119.0
116.6
118.4
116.6
c
.
0
--
Hamilton Gas
♦13%
.9
+
-7
3.8
12 Va
5
1.8-:
—
Gas
"2%
+
3.4
44%
2%
4-
2.9
118.4
116.6
1.8
4
113.3
116.6
120.4
,
—
T16.6
118.4
117.1
5/ -7/47
,
113.1
116.6
3/26/47
-
117.1
116.6
117.1
26%
9%
116.6
3/26/47
119.4
8/25/48
3/26/47
117.1
15%
Va
22%
4/23/47
3/24/48
Service™—.
Fuel
Supply
National Fuel Gas
-Northern
Natural
116.6
4%
18
11%
20%
23%
15%
21%
2.8
Natural
Panhandle
Eastern
Pipe Line
-c
116.6
+
3.8
116.6
—
117.1
'116.6
10/22/47
120.4
116.6
—
3/26/47
117.1
116.6
—
3/26/47
117.1
116.6
9/17/47
: Rio Grande Valley Gas—
,
115.9
\
,
Gas_
31%
3.8
U6.6
116.6
121.0
116.6
—
>,
23.6
+
+
2.3
11.9.0
116.6
—
3Va
4-
4
53%
58
96%
-7/
56 %
§32 %
v
,
:;
1.6
4.4
,?v
■
..-.t
4-60.0
+14 Va
3.4
+ 89.2
+
Va
8.1
+
1%
1.5
Va
.3
2%
Tennessee
Gas
4/23/47
rts.8
116.6
+
3.8
16%
o
Texas- Gas
—10.3
11%
o
Texas
Public Service
o
Texas
Southeastern
Gas
30%
11%
7/
7/48
126.9
116.6
2/47
118.4
116.6
—
1.8
22%
24%
12/17/47
116.3
116.6
+
.3
6%
6%
113.3
116.6
+
3.3
O
York County Gas__
:
112.8
116.6
+
3.8
22%
3/10/48
108.1
116.6
+
8.5
10
:
_
5/
113.1
116.6
+
3.5
116.3
116.6
..
18
4/23/47
3/24/48
__—
AVERAGE
—
4/
Ohio Gas
7/47
Lindley.
-v:
-
-
19%
23%
9
-
♦Equivalent to 16%—l'/s for 1, April 14, 1948.
fEquivalent to 47V\- -3
§Equivalent to 65- -2 for 1, Oct. 15, 1947.
17, 1947.
1!No change.
for
53%
1,
+
+
-
56
22.6651
1%
25.7262
Jan.
28,
+
1948.
2 %
JEquivalent
to
Spend it at .the annual NSTA CONVEN¬
TION-, in
Dallas, Texas, starting Novem¬
ber 14th.
And for good results place an
advertisement
now
in
the
Official
vention Issue of "The Chronicle."
to 25 Park
Coii-
Send it
Place, New York 8, N. Y.
Jim
Jacques, First Southwest, appears quite absorbed as Mrs.
Jacques calls out the next step in a practice square dancing session
.
held recently by members of the Dallas Bond Club. Other members
dancing with their wives are: Bill Newsom, of Sanders ■ & Newsom;
Merrill Hartman, Merrill Lynch, Pierce Fenner & Beane; Charles
Pierce, of Raucher,Pieree & Co., Inc., and Allen Oliver, of E. F.
Hutton & Co.
'
.
.
_
.v
.
.
The Commercial & Financial Chronicle
OFFICIAL ORGAN OF THE NSTA!
/
.
1.8
+
6.9
f
4-
4.9
|
'
61—2
GOOD time?
5.6
7.7
—10.0
.3%
Square Dancin' Time Down in Texas
a
+
3.1
■
8.9
4—
3.4
7.9
16.0
+
—
2.9
IV*
1
Sept.
for
—15.8
A
6.0
Washington Gas Light-
:
5.4
19%
+
United
2.0
IV2
.5
116.6
West
+"1.2:
1.4
3.6
134
'116.6
110.6
c
A
%
%
4
4
117.1
O
+
17%
3/26/47
NY
3.2
■:
3%
4/16/47
Gas
.6
27%
Natural
Transmission—
:
v
.i.i
.4
'23%
Southwest
Transmission
4-8.4
...4
•'k
;
+10.0
3.2
—
IvbV
4.1
2.0
.4
__
Va
—
2.4
Southern Union Gas
Gas
+
—
31%
■:
4%
+ 19.6
3.2
2
;
3i
.
2.9
3.4
—
21
93%
'
+ 16.8
+ 40.2
+
+
•
.4
+
10
34%
21
o
-
:
3.4
+
'.4
.5
+
+
+
.5
2.
117.1
115.0
8/
.5
o
following examples of Texas
Miss Jean McCright, Miss Joan Adams and Miss Ruth
.8
+
2.3
—
—
Va
%
—
$30%
O
pulchritude:
1.
+
.4
%
6
12%
+
6/47
3/31/38
•
si
12%
—
116.6
;
3.8
—
8/20/47
Southern
Natural
116.6
'
.3/26/47
Shamrock Oh & Gas
Southeastern Public Service
NY
Johnson, of
7.4
+' 9.2
•
-
A
—
3%
*
11%
12%
3.3
112.8
120)4
Pennsylvania.Gas
j Peoples Gas Light & Coke___;
Republic Natural 'Gas_______'
O
NY
-
+
4/23/47
Gas
Gas
113.3
+
3/26/47
Oklahoma
O
Sam
3.1
+
11%
.5
3.8
—
—V-
10/22/47
—
Gas___—
Oklahoma
Northern
NY
Company, and
9.9
.4;
—
25 %
—.5
116.6
O
the
IVa
.15%
)
.4
>%'
+
9.1
+ 34.6
1.5
—
+
+
23
.5
—
116.6
112.8
Gas
NY
&
Va
16%
+
3.2
—
;
2.9
+
6%
5.3
+ 6.3
—
'
mm.
with
'
tl5%
-■
15%"
—': .5
+
3.5
5%
v
36.5
+
1.5
T—
'
Minneapolis Gas
c
shown
9
43
.5
—
•
116.6
V*
69%:
19%
1.8
116.6
r
63%:
3.8
116.6
117.1
:
+
4 V*
3.3
+
—
;
—
—"4.0
1.5
10%
47 »A
Mobile
NY
are
5|%
V/a
3.3
3/26/47
o
Davis, of E. F. Hutton
5.2':
3.8
Mountain
c
Ipham,
+
.6
2.0
+
0
Jim
~%
•
—
+
o
Harris
4-
2.3
116.6
3/26/47
'Interstate Natural.Gas__
: Kansas Nebraska Natural Gas
;
2.4?*.
+
3.4
12
Va
In
Stock
+
.8;
—
8
8
2.4
—
1
■-i
%
16%
+
%
17%
16
—
Change
.4%
—
116.6
9/15/48
Gas___
Indiana Gas & Water__
Star
5%
5%
113.3
.
3/24/48
Lone
.5
—
Change
Change
112.8
4/23/47
Gas
10/22/47'
Natural
on
9/15/48
Utilities
El Paso Natural Gas~
Houston
on
3/24/48
9/15/48
Gas
Empire Southern Gas
NY
,
hJ
'
Stocks
4/23/47
Gas
c
t o
.
in
9/22/48
8/ 4/48
&
O
-
S.' dBk.
in
Date
Stocks
11/12/47
Light__^
Electric
NY
■
Here, Delegates, Is Texas
v.''
Stock
9/10/47
Gas
Arkansas Western Gas^.
;
-
Natural
O
'
First
3/26/47
Arkansas
NY
-,'A
50
Recorded
.:-
v
m
Traded
c
Price
Date
50
Stocks
50
First
& Son.
■'-Z.yZ
'
Where
Members of the Golf Committee
+
4.7
4-13.5%
for
1,
14
(1546)
THE
COMMERCIAL
FINANCIAL
&
CHRONICLE
Thursday, October 14, 1948
by special influences peculiar to it alone.
go counter to a general trend.
And individual corporations
often
"If you
made
understand all these problems thoroughly then you have
on
sound investing.
Just a start.
start
a
"Complex?
Indeed it is.
Even
the
for
investment
professional
managers.;
SECURITIES
Prospectusyour
upon
By HENRY HUNT
National
A
request from
investment dealer,
research
"These
or
from
securities
Life
&
corporation
120 BROADWAY, NEW YORK 5. N. Y.
this
in
1899,
than
more
century later, that the
a
combined assets of all American life insurance companies hit $1,600
million approximately the present assets of the mutual fund business
Growth
of
mutual
rapid
more
than
fund
that
in
assets
of
life
recent
has been
years
insurance
assets
on
rapid,
percentage
a
basis.
However, with mutual fund assets starting from a low base
not surprising.
Over the next 10 years, mutual fund assets
duplicate their 500% growth of the past decade, but on
dollar basis they should show an even greater growth. The follow¬
is
this
not apt to
are
a
ing tabulation, listing the increase in life insurance
Bullock
Dividend
Fund, Ltd.
during the past 50
years,
is
the mutual fund business:
Assets of All American
Year
1917
1927
available
1937
1947
Investment
Dealers
or
the
Keystone
•-■?
forms of life insurance are not comparable to the
purchase of mutual fund shares, policies of the endowment or annuity
"Improve
would
be classified as direct competition to the mutual fund
Roughly speaking, endowment insurance policies require
long-term compulsory saving (unless you want to take a beating)
while
mutual
funds encourage the
voluntary investment of /surplus
savings.
Furthermore, mutual funds are designed to provide a
higher return than do insurance policies of the "investment" variety,
few of which yield more than 2y2% today.
Unless American
substantial
a
show
industry has reached its zenith, mutual funds
part of their assets in
considerably
greater returns
stocks,
common
the
over
longer
apt to
are
than
term
such
insurance policies.
be
Manhattan
y
to
review
maintenance
and
repair
disproportionately high in relation to
are
rentals, and sale and reinvestment of
'
1
"Increase
Net inecome
booklet
agement
line
replete
drawings. The
following being
vestments to members of your family now.
and
lawyer
your
best advise
can
copy
with
an
charts,
and many
Income From Securities. 1 A check of your security
against the entire range of possible security investments
may reveal that you are getting good income results, or it may show
that you have overlooked types most suitable for income.
If your
"Increase
holdings
divided
are
among
sufficient
a
"Well
advice.
elaborate three-color man¬
beautiful
illustrations
and
It is practiced by intelligent businessmen, farmers
It is only the application of the
That law will never;be repealed.
property, farm property, etc.—might b§ profitably converted
'
"Investing
money
is likewise
careless
beyond
belief
in
,
profession.
a
"Yet the average man who works
often
'
'
,
his
i
.
^
/
"
financial
for
"Our
particularly with respect to
policies,
S.
U.
Government
efforts
to
opinion
in this
marized
It
Bonds.
it—and
preserve
"Inflation
stantial
seems
his
all
so
in
clear that the
one
of confidence
orHtwo
or
even
random, reviewed only 'once in
"Diversification
itself is
a
not
dozen
a
securities,
selected
at
while.'
fiscal
authorities
In order to provide
have
to
industries will be
"Our
ibasic
will
outmoded?
economic
they
The
pattern
create?
new
/Which
of
many
born
present
our
talism,"
"Mutual
too.
Our
social
and
political environment is far from static.
"Prosperity, recessions,
throughout history.
depressions have
followed
another
one
ferent ways.
"Each
sonable
."Steps
moreover, has its peculiar
trend, each is affected
financial
detrimental
to
worth
well
be
reading.
The following
"■
funds
to
vital
are
constitute
the
woman
can
or
success.
progressive
a
They
American
method
practical
most
own
government
by
taken
only half
are
resources
for
one
capitalism
which
by
share of big business with
the
rea¬
accomplish this by institutional¬
and
measures.
himself, who
or
industry
to
broaden
stock
Such steps fail to take into
may
ac¬
be emotionally unstable, lack
for diversification, and may have no training or
of
more
these
Too many investors fail the first
reasons
stocks.
common
tion.
^Ock
PREFERRED STOCKS
and
never
again
invest
in
V
contrast
mutual
funds
are
run
experienced
by
investment
RUSSELL BERG FUND
.
nesses
INC.
FUND, INC.
Capital Stock
or
Congress Street
Boston 9, JMassacliusetta
of
Stock
on
Request
Fund,
terly
dividend
payable
Keystone Company
of Boston
Board
on
Directors
of
AND
UNDERWRITER
Russell, Berg & Company
Investment
Counsel
20
October
holders OH record
INVESTMENT. MANAGER
has
Inc.,
of
declared
cents
29,
1948
E. E.
quar¬
a
and
(2)
it will
share¬
Street, Boston
TELEPHONE LIBERTY
2-^9550
in big and medium sized busi¬
of
the three major
,;V
points in our progressive capitalism
(1) increasing the number of economically stable families
widespread ownership of big
be through an
business—are to be achieved,
extensive increase in the use of mutual funds.
No other
answer
is
practical."
1948.
Crabb, President
Manager
INVESTORS SYNDICATE
Joins
With Herrick, Waddell Co.
(Special
FT.
75 Federal
invest primarily
share
Principal Underwriter and
Investment
two
—namely
per
to
funds
|
Investors
of October 15,
as
misled by sentiment in selection
because they must remain liquid.
"If
Dividend Notice
The
Prospectus
"Mutual
INVESTORS STOCK
(Series S1-S2-S3-S4)
Prospectus from
Their managements are seldom
of investments.
(Series IC1-K2)
COMMON STOCKS
us as
managements and have adequate resources for scientific diversifica¬
(Series Bl~B2~B3~B'4)
50
themselves strike
stocks."
common
skill in the handling of investments.
"In
BONDS
found
we
the investor
time
industry,
prices
regulated
a
.
prospects of
ownership
count
These affect different types of securities in dif¬
have
izing the investment management problem.
IN
The
which
excerpt:
an
constantly replaces the old.
changes,
to
& Company of Detroit has issued an eightpamphlet titled "Mutual Funds and The New American Capi¬
page
they
startling number of recent inventions,
desire
Recommended Reading
man
industries
we
Lerchen
average
What
unless
investment of funds in
the
because
"Think of the
no
program.
abandoned
be
quate protection to principal and income, diversification must antici¬
war.
have
may
disastrous further loss in the real value of the dollar.
or
pate the many changes affecting values.
of
-i
as the result of either a sub¬
dynamic revival
business outlook. In this event the
choice but to lower, if not largely
"None of these possibilities in
to
ade¬
For example:
-
gain momentum
"Eventually the artificial pegging of government bond
will
economy
is
enough.
..
in armament expenditures or" of a
in the longer term
to
with money to invest should not
man
V
the pegging of government bonds may be sumIf the cost of living* stabilizes or declines
on
could
increase
Watling,
"It
"pegging" the
follows:
as
manner.
make it work for him.
risk
concludes
V
moderately during 1949, the policy of supporting long-term govern¬
ment
bond prices at current or only moderately
lower levels is
likely to be continued for a time.
'
; "
hard to make that money lis
so
«
"Pegging" of Government Bonds
discontinue, the support
doctor, the lawyer, the'scientist
I
when he has need of them.
issues chosen
of
income-producing classes of securities, you should enjoy rela¬
tively dependable income ranging from 4% to/6% or more, depend¬
ing on the classes you employ. Some other investments—mortgages,
established, too, is the principle of seeking professional
The average man consults the
number
?rom
market
is thoroughly readable throughout, with the
others in their daily lives.
law of averages.
Your investment dealer
in this regard.
you
Hugh W. Long's October "New York Letter" discusses govern¬
sample:
a
to sound investing.
local investment dealer
,
Under present Federal
holdings
"The principle of spreading risks—diversification—is not peculiar
four
be in¬
•''•
gift tax and estate tax provisions, it is sometimes possible to increase
net income by making gifts of income-producing property or in¬
ment
jCalvin Bullock recently published
investing tlieir capital
may
your
it begins, boy, oh, boy!
once
The Law of Averages
>
.
INC.
in
money
!::
.
by Making Gifts.
..
Certificates of Participation
mortgage, it
a
"Increase Income
from
Property.
Under some circumstances
property can be more of a drain than an asset. Do you have property
that might profitably be leased or rented?
If. it is already leased,
can you
lease it at a better rate after improvement? In some cases
to this type of investment."
For Novice Salesmen
tough getting started but
Bond Fund
INVESTMENT FUNDS
hold
you
it
elsewhere.
Selling mutual funds is like pouring ketchup out of the bottle.
It's
Funds
if
Your Mortgage Holdings,
well
carefully to see if your money is in¬
advantageously as possible. Normally, mortgage income is
relatively dependable and satisfactory. Unfortunately, today the in¬
flation in real estate values frequently makes the
security .behind a
mortgage questionable, and return is sometimes low in relation to
doubtful liquidity in future. Money so used may be better invested
•ental
Custodian
Bdston,
of
as
many
may
with
.eystone
Company
of
business.
Established 1894
by
,
While
type
CALVIN BULLOCK
management of
That is their job."
Money to Work. Bank deposits usually pay a return
from 0 to 2%; some Mutuals pay slightly more.
Even capital in
Savings and Loan Associations is probably paying only from 2V&%
to 3 V4 %.
Certainly a much higher return can be obtained today
through a variety of investments.
""T *l,
51,735,000,000
from
'
the
"Put Idle
14,392,000,000
26,249,000,000
A
published
dicated.
5,941,000,000
Prospectuses
"3
that
cites five ways to increase your income as follows:
controlled
§1,345,000,000
3,053,000,000
1907
*i\
<
•
Life Insurance Cos.
1897
■
assets
company
indication of the growth potential of
an
Shares, Inc.
Nation-Wide Securities Co.
"Keynotes,"
vested
which is less than 25 years old.
far
however,
Ways to Increase Your Income
country traces its origin back to the late
not until
was
problems,
■investment companies endeavors to solve for
you.
Comparison With Life Insurance Growth
insurance
but it
1700s
the
are
to
The
Financial
WAYNE,
Johnson
is
now
(Special
Chronicle)
IND.—Clare
with
A.
Herrick,
to
Merrill
The
Lynch
Financial
Chiontcle)"
LOUISVILLE, KY.—Boone
Rose,
Jr.
is
now
with
Merrill
Minneapolis, Minnesota
Waddell & Reed
Inc., Union Title
Building, Indianapolis.
Lynch,
231
Pierce, Fenner
South Fifth Street.
&
Beane,
Volume 168
Number
THE
4742.r
COMMERCIAL
&
have received
Financing
Vice-President
and
Financial
New England Mutual Lite Insurance
*
A
Secretary
Company, Boston
confiscatory
taxes on market for corporation equities, and contends
life insurance companies have, because of
this, become most impor¬
custodian of savings.
Denies insurance companies do bank¬
ing business and private placements lack marketability
I have chosen
First,
they
and
to
are
not
of
that
each
surance
not
industrial
in
as distinguished from
railroad and public utility financ¬
ing. the percentage is
higher. *
us
in¬
have
we
47
par¬
best figures
from a survey of
the
companies,
come
companies
made
the Sub-
by
ticipated
in
Committee
this
of
National Association of
type
C
investment.
B y
of
course,
the
direct
or
to
a
long
familiar
been
estate mortgage
been
in
the
field, but that has
comparatively
it
it
cause
securities field.
new
and also' be¬
the
to
Because
is
has
rapidly, it
is perhaps understandable that it
is looked
grown
so
with suspicion by-
upon
quite revolutionary de¬
velopment. It is largely because
some
as
a
of private
ple; that
placements, for
exam¬
of having
entered the banking business, with
we are accused
that
could
imply in potential
regulation.
:;/>!!/•■
seems
to
.
nature
me
the
of
private
place¬
ment of securities and the reasons
its
development.
portant,
we
problems
must
they
No less im¬
recognize
present
the
both
to
ourselves and to regulatory bodies.
Perhaps also we should explore
the potentialities of further utili¬
zation
of
this
mechanism
for
the
financing of American industry.
In everything which I shall say
concerning private placements, J
want
to
suming,
emphasize that I
I
am
as¬
think
justifiably,
that the overwhelming majority
of life
insurance companies in¬
vesting in private placements are
selecting them with the same high
and
standards
and
the
diligence
traditionally used in the selection
of
real
market
estate
same
mortgages
corporate
securities.
that
This
and
does
or
errors
not
open
figures of
can be rela¬
we
in
modification of indenture terms
financial
holders
will
have
had
will not, be made in the
better known fields of investment.
Extent of Private Placement
business
of
changed
about
come
private
place¬
ments is no fly-by-night develop¬
ment, neither is it small. During
the past ten years approximately
$10 billions of securities have been
placed by this method, represent¬
ing about 30%' of all corporate
flotations in the period. To date
this
year
the figure has been
,!!An address by Mr. Badger be¬
the Financial Section of the
fore
American
Life Convention, Chi¬
111., Oct. 4, 1943.
» .■
conditions both
since
and
the
war
have
result of many
as a
in¬
fluences, most of them interacting.
As you are all aware, during the
15 years ended 1945- the long-term
private debt of this- country de¬
clined
from
about
$94 billions to
You
are
even
more
painfully aware that because of
this define we went through a
struggle
assets
to
to
put
work
public?
the
long
standpoint?
ence
and
obstinate
holders
we
who
minority
are
ing
security
billion
than in invest¬
the
end
of
of
other advan¬
many
private
placement.
instance, the comparative
For
ease
of
negotiating a "tailor made" piece
of financing to meet an unusual
situation.
is
A good recent example
the
$250,000,000 loan to Shell
Carribean
Oil, a transaction so
complicated that it probably could
have
not
Both
been
financed
before
Harbor,
publicly.
since
and
Pearl
private
placement has
been
an
increasingly important
method for the financing of small
and
medium
sized
corporations.
a
turn.
rising supply of invest¬
The
ment funds
reasonable rate of
on
ments of the SEC, and partly to
changes in the bond market itself
since
and
the
hand and
one
the
other, aided and abetted by
the government's low interest rate
policies, made it increasingly dif¬
ficult for life companies, particu¬
larly the larger ones, to purchase
corporate investments in
personal income taxes.
individual
buyer
of
high
Therefore,
able to
assure
their
in order to be
themselves of suit¬
ably sized bl ocks of
ties.
many
new
insurance
securi¬
companies
took aggressive steps to arrange
for the direct placement of entire
issues privately.
institutional affair.
Question of Small Bond Issues
Why, it
In
a
?!
seeking such investments in
highly competitive market,, in¬
companies had/ much to
surance
offer.
In
private
the
first place,
placement
a
through
corporation
panies. be
like
licly
vate
corporations that
owned.
creased
are
In most
insurance
good,
but to
company
unknown
and
suggest
chase.
they
family
or
figures
prospectus
a
Often
because
facts
company may
perfectly
little known
world.
closely held
portrayed in
a
on
such
bond is
a
prudent
a
cold facts
company
are
What about the
on
insuf¬
a
pur¬
all-impor¬
tant factor of
management? How
is the corporation regarded by its
suppliers and customers? What is
its
reputation
in
the
trade?
Are
its plants efficient, up-to-date and
well maintained?
It
costs
time
of the
cost, of registering with the
Many corporations stress
matters.
money
The
comes
lic
very
up
to
I
by
$21 billion.
That
took
assets
investigate
practical
whether in
a
these
question
small pub¬
offering such investigation is
justified. Docs it make sense, for
example, for an Eastern insurance
the
that
the life
insurance
engaged in exten¬
are
sive research, seeking
33
Thomas W.
Your
years,.
know
companies
''X?;
increased
/
v
by
again iii the last
bases
Phelps
.
that
much
for
their
new sound
widening of
further
investment
channels.
I
am
that the extensive develop¬
aware
seven
years, 1941 ment of rental housing, GI mort¬
through 1947.
gage financing, real estate for in¬
You passed through the great¬ vestment, and stock
holding are
est
depression
in
our
history all results of that continuing re¬
without once showing a year-to- search.
But my second question
decline in assets.
year
in
once
the
last half
In fact, not
century and
have your assets at the end
more
of
bny year failed to set
high record.
"' '
The total
ance
amount
owned in the
a
new
life insur¬
of
have
I
four
one
out
of five
two
or
you, in my
of the ancient
of
members
who
the
right way?"
There
I have
therri
been
you
the
to
recalling a
merely * to
A
nancial
that
I
explain
that
mounts
few
on
earth.
>
at all had I not recalled
read many-years ago,
a
great
lute
king who
master
known to him.
the
king
was
powerful.
that
it
should
the
be
he knew
inevitable
surrounded
with
him
he
and
agree
him.
near
that
by people
who would flatter him
Accordingly, he com¬
manded the court jester to stand
on
state
hit him in the face
with
occasions,
now
and
and then
wet bladder, just to remind
a
the
eco¬
nomic ladder he takes his children
them
in
public schools and puts
private schools rather
continuing to work to make
public
builds
schools
himself
outside
better.
house
a
on
He
a
hill
whole town beautiful and safe for
story goes,
wise as he was
Being wise,
was
to
man
a
abso¬
As the
as
on
-
of town,
puts
a
wall
it, and hires a watchman
instead of striving to make the
story I
the
was
as
poor
on
world
a
the story of
all
of
come
rungs
a
went
soon
as
individual
him
editor
The
a
an
make
to
announced
probably should not have
for
success
tends
:
my
with
Insurance
country editor once observed
is something about fi¬
talk I come' before
'the
admiration
and
subject of
of
Investors
as
that there
citizen.
show that despite
signs that it is
many
of Isolation
Danger
go
business.
are
later than you think.
Companies
my
but you
■-
families
on this way for the
allotted 20 minutes,
know the figures of your
■
king's court jester,
"Are you changing your invest¬
ment policy fast enough, and in.
life insurance.
could
self-appointed role-
is this:
United States is
approaching the $200 billion mark.
Nearly
to
the
unknown
The
and
that the most burdensome part of
companies in-
shock
decline* in
of the issuer.
power
business
investment
have been
earning
than
pub¬
smaller bond issues involve
are
ybur
equity
some
absorb the
will
considerable
a
executives of the most successful
offered
to me, are obvious.
the
of
such security there
buffer,
a
out of the
to buy them through pri¬
placement? The answers, it
cases
that
humility that should characterize
anyone
in the presence of top
willing to buy small
as
of
the
be
value
you
com-,
as
seems
avoid the trouble, and part
registration with the SEC is not
the original filing, but the con¬
tinuing
requirement
over
the
years for additional reports, com¬
pliance with new
rulings and
assets
But for every
must
asked, shouldn't
bond issues that are
could
SEC.
1934
and
of your assets is invested in bonds
and other fixed-income securities.
as
as
insurance
may be
institutions
protected position in our econ¬
omy?
Right now more than 90%
1891
few: of
ficient evidence to justify
Requirements
tween
can
a
Be¬
ever.
rest
an
"/
Influence of SEC Registration
growing
vigorously
im¬
and
Hence the corporate bond
market has become very largely
an
your
to be
seems
disappeared under the twin
pact of low interest rates
they
to/meet
money
taxes.
to
markets
easy
it
than
more
you continue to grow
at the rate of the last 10 years and
business,
own
the
open
of
of
to
still hope to'invest the great bulk
of your assets so that they occupy
awe-inspiring
grade corporate bonds has all but
enough
needs.
advent
high
The
re¬
the falling demand for capital on
the
longer
the
,
Your assets
1891
<t>-
year.
Despite
size
vestors and corporations alike.
tages
last
be
extremely
costly to the best interests of in¬
were
billion dollars in
a
at
positions,
There
companies.
have increased from less than
$50
through strike suits and
can,
'
You gentlemen represent the most
amazingly successful business
in the most powerful nation in the
history of the world.
That is the
business of the United States life insurance
interested
more
in the ticker tape
holdout
shortage of risk capital as menace intensified by life insurance
companies' encouragement of bonded indebtedness.
Holds sound
equity investments a buffer to sound bond investment.
practical
more
know from experi¬
that in a public issue small
expanding
anything ap¬
proaching
to forestall insurance investment
monopoly. Warns insur¬
companies lose when they do not get judgment of investment
banking business.
Points to present stock market situation, and
ance
incidentally,
And,
creditors'
Certainly
our
at
tions
holders among the gen¬
might this not be
Co.
Says tactics of isolation may
be opposed to public welfare and thus bring about counter
regula¬
;
personal acquaintance with the
corporation's
affairs
than
with
scattered
&
Exchange
stock market guides and
registration.
structures
who
Stock
j Investment banker calls attention to dangers confronting life insurj ance companies in acquiring issues of securities independently of
it
seems
These
Member of New York
or
a
before
Partner, Francis I. du Pont
advisable,
obviously be more
practical to negotiate with a few
sophisticated creditors or stock¬
wouldn't
from
Guide in
a
Managing Life Insurance Portfolios
pri¬
placements, often important
from a corporation's
standpoint, is
their
flexibility.
If
unexpected
future' changes should make some
of
as
15
By THOMAS W. PHELPS*
consideration
to me we are dealing set the figure even higher).
In
logical evolution, one that most cases the cost of distributing
has developed to meet specific fi¬ a new bond issue of this size to
nancial needs caused by changed the public has become almost
pro¬
conditions in the capital markets. hibitive, partly due to the require¬
mean
of
or
This
ter it
municipal
comparable mistakes have
means
cago,
little
into
get
magnitude
With
open
judgment have not,
or will not, be made in the private
placement field—any more than it
not,
such
we
$72 billions.
.
extremely im¬
portant that we shbuld understand
for
When
the
in
tively certain that we are dealing What I have in mind is corpora¬
with something more significant tions in need of sums up to say
real than a fad. In this particular mat¬ $2,000,000 (and many people might
adapted only
recently
the
a
10% of admitted assets.
public
sold
market. They closely resem¬
method of financing that has
open
It
the
at
Badger
offerings
througn investment bankers in the
all
that
Insurance
This survey
end of 1948
I should guess that as of
today total holdings of life com¬
panies might be in the neighbor¬
preferred hood of $6 billions, or well over
C.
stocks with institutional investors
ble
o n e r s.
ments.
Sherwin
place¬
contrasted
i
s s
the
of
$4% billions of private place¬
over
ment of bonds,
debentures, notes
as
Valuations
on
these 47 companies owned
I
mean,
i
o m m
showed
private
placements
much
very
As for the position of life insur¬
ance
have
yet
while
financing,
com¬
panies
40%,
nearly
ev¬
life
many
subject for three reasons.
to life insurance
a
important
<b-
though
even
risky.
during the past few years.
Second, they
understood yet.
And third, they involve many
to
of
as
been
second
eral
increasingly
are
a-nd
one
or are
business
generally
qrob-
concern
ery
become
American
broad
lems
private placements
have
had
The Stock Maiket
vate
Asserting private placements are no fly-by-night development, Mr.
Badger estimates in past decade $10 billions of securities have been
-disposed of by this method. Contends it is logical evolution devel- *
oped to meet declining volume of long-term issues in face of increase
ing demands by institutional investors.
Stresses adverse effects of
tant
would have been obtainable if the
issue
(1547)
higher yield than
a
market.
By SHERWIN C. BADGER*
Second
CHRONICLE
companies have usually been able
to share
part of the savings of
setting up a private placement and
Private Placements—A New
Medium of
FINANCIAL
him that he, too, was mortal.
History does not relate what
happened to the jester, but I sus¬
,
around
all.
his
Sometimes he
own
even
develops
water supply and his own
fire-fighting equipment.
his
worse
words, the
of
its
vidual
Is
The
other
is
it needs the'help
most
inclined
run—in
town
more
he
able
is
to
men—the
more
splve his indi¬
problems that way.
there
danger that in
investment prob¬
superlatively
successful business you may be
thinking too much about making
analyzing
lems
sure
of
any
the
your
own
that your companies will be
all right
in event of another deep
depression, and not enough as
thusiastically and lost his head. managers of a business so large
that nothing that is good or bad
Nevertheless, when I tried to fig¬
for the country as a whole can
ure out how I could add anything
fail to be good or bad for [you?
to the vast pool of knowledge and
pect
that
obeyed
his
sooner
or.
instructions
later
too
he
en¬
Unlike the individual who has
have
here,
I
thought of the nothing but his conscience to re¬
strain him from looking out for
court jester's role.
Accordingly,
company to send a man to the I am here not to tell you anything, himself and letting the devil take
West Coast to make a study of a but
merely to raise some trouble¬ the hindmost, I suspect that you
many
other details which some company contemplating a public some
questions. You undoubtedly already have, or soon will have,
people sometimes refer to, unflat- bond issue of $1,000,000? Even if are better
qualified to answer too big a stake in the "town" to
teringly, as red tape.
make
it practicable for you toinvestigation shows the bond does them than I.
think of anything but the general
Ordinarily,
financing
directly meet the required qualifications,
My first question is, "How much
Eastern
via the private placement route is the
insurance
welfare.
Your advertising urging
company
no
assurance
it
less costly to a corporation than has
will
be
*An address by Mr. Phelps be¬ the public to guard its health in¬
able
to
buy
any
reasonable fore the Financial Section of the dicates that you aready are think¬
financing through a
registered
public offering.
that
way
The reverse of amount of bonds, because com- American Life Convention, Chi¬ ing
regarding
some
this, of course, is that insurance
(Continued on page 31)
(Continued on page 33)
cago, 111., Oct. 5, 1948.
experience
you
despaired until
I
16
(1548)
-fHE
COMMERCIAL &
FINANCIAL
CHRONICLE
Menace of Government in Grain Market
Securities Salesman's Corner
By RICHARD F. UHLMANN*
■,i,...
President, Uhlmann Grain Co.
,
By JOHN DUTTON
John Albert
veteran
"u® an
that
s
Goodpasture, Captain
hospital
AUS retired, who is
in
now
as a
inferred that positive brain
we
waves
could
be used
with
at too
tbOrain waves; 1 have
repeatedly observed it when
ft© World War
It; also my father (now
a salesman prior
deceased) who was an expert
had repeatedly observed and practiced it.
All
during the war, and ever since, our agricultural production has been at unparal¬
heights, with the exception of last year, when there was a failure crop in corn.
We
thus able to ship record quantities of food abroad without impairment to our own
leled
were
salesman for 20 years,
Did you ever observe how
healthy a successful man appears? How
calm and relaxed they
appear? I once experienced that success feel¬
ing. I was knocking down in sales salary and expense a substantial
.
high levels, and upholds functions of grain exchanges.
in
selling to the advantage of the salesman. We quote from
Captain
Goodpasture's letter. "I absolutely agree with what
you say about
.
Dur- $-■
ing this whole protection, to catch
period
there before it is too late.
economy.
.
jobs
It
for all who
last
wanted
work,
economic
pres-
were
income (during the depression
too). I believe most ills result from
tension, fear, etc. The better I felt the more I sold, and the more I
sold the better I felt."
and
at
Similar expressions from other men who have been
engaged in
sales work seem to bear out that there are certain mental
sent
about
tals of
are
to follow.
gainfully
employed.
with what you have sold him than with the
cash.
for the lack of business in the securities markets
inertia of those who
have been
are
sitting tight
One of' the
Richard
F.
human
day to day, how in the world
the best
too
go out and do something constructive?
Quite
that it is better to have even one or two men in
can
they keep it up from
man disregard such
even
environment and
an
■frankly, I
am
sure
fused
Uhlmann
organization, who have momentum, confidence, good cheer,
the will to work
intelligently and a healthy outlook on life, than to
have several dozen men who are
discouraged and disheartened.
should
we
lnl
i
who believes in his mis¬
integrity and sense of fair play, DOESN'T
BECOME DISCOURAGED. You
may also have noticed that the fel¬
low who keeps on going is the one who also does
not take himself
;oo seriously.
Lucky is the man who can laugh at himself
in
...
-every walk of life this saving sense of balance
-on this planet much
more livable.
Yes, there is such
thing
a
as
brain
RIGHT if you want to do RIGHT.
before
you
will show
can
.
.
.
success.
the outside.
on
believe it
have
a
man's days
You've got to think
waves.
got to smile
Then others will
and that is
the secret of
i
pionont
It
it too and they will
see
success
in
selling and almost
everything else.
J
Correction
of
should
there
confidence.
enveloped in
a
be
Oct. 7 it
was
H. .Morris
For
reported that Edward
of economic
mass
anxiety, possibly the result of
fear which has gotten out of con¬
trol.
Human beings are so con¬
stituted
that
of
is
if
they
certain
never
dangers,
quite
Frederick
C.
J.
P.
Morgan
&
Co.
Inc.
and
known
H.
as
when it
occurs.
seldom
develops,
We find that panic
matter
no
how
an
advance
so
event, if there is some
knowledge of what is to
that
we
are
able to cope
cases a
strikes.
loss of mental bal¬
Bureau for years has been in the
habit of sounding storm
warnings
far ahead
as
as
this paper was
second
we
million
1
employees.
Now
million, and federal
employees are increasing at the
rate of 500 per day.
Without free
have
we
There
2
we
have
can
only a
socialism.
by. state
alternati ve.
is no
tem^aahTljerTirenaced
This sys-
destroyed
or
of
one
threey&ay& First, by exand exorbitant taxation;
possible.
Even
being prepared,
hurricane
had
been
as
Messrs.
still
are
that
was
Morris
members
in
and
of
it,
error,
Wessel
and
the
Kingdom
Loan
of
30-Year
Belgium
External
a
Sinking Fund
fore¬
cast for New
Gold Bonds due June 1,
act in much the
demption
on
Dec.
1, 1948,
at
107V2%. Subject to the provisions
search
of
peated
Executive
Order
No.
has
same manner.
shown
that
application
Re¬
under
of shock
re¬
dif¬
8389, as
a special
amended, the drawn bonds will be ferently applied, an animal may
only and will paid at the office of J. P. Morgan become crazed or be only men¬
& Co. Inc., or at the
principal of¬ tally annoyed.
dissolved after it has been at¬
fice of Guaranty Trust
Company A Chain
new
firm
was
temporary
be
this
have been
formed for
purpose
tained.
of
of New York.
It is
ican
no
Official
wonder that the Amer¬
people
today confused
They have endured
are
and restless.
for
Over-the-Counter Quotation Services
of
many
official
It
telligent for
health,
as
after
that
so
the
same
as
experimental
would, indeed, be in¬
well
as
for
of
mental
economic
Street, New York 4, N. Y.
Chicago
1
San Francisco
*An address
annual
by Mr. Uhlmann at
meeting of Grain & Feed
Dealers National
Association, Chi¬
cago, 111., Sept. 30, 1948...
~
,
except for the past few
when the European demands
so great.
years
have been
Government
Private
vs.
Transactions
One
resolve
must
whether
in
work
for
handling
transactions
himself
these
big
governments
can
efficiently than those
a lifetime in the
answer
is quite
obvious if we study the facts. First
of all, a country like the United
States, with its tremendous re¬
sources, has greater difficulty in
buying for the reason that its op¬
erations are generally so exten¬
more
who have
spent
business.
sive
The
that
it
has
usual influence
often,
the '
than
more
markets.
on
Very
purchases
government
taxation.
heavy burden of This
a
We
telligent
strong and vig¬
enterprise system,
stand in¬
even
can
reasonable
and
regula¬
tion, but we cannot stand govern¬
ment competition. This will quick¬
ly.
.
destroy
free
the
enterprise
system.
Government
.
may
in
Grain
Business
be interesting, therefore,
tol inquire
why- the government
grain
business;' to
compete with its citizens, particu¬
entered
the
larly since private interests had
always done an extremely good
job in handling their affairs.
I
might say that until 1929, there
was never any government inter¬
ference and
very
few controls.
There were no subsidies paid to
the farmer, and while he was left
entirely to his own resources, in
the main he did very well for
himself.
It
is
true
that
we
had
agricultural
than wheat farmers in many
other
the world.
As a
neglected, acre¬
reduced, and gradually
parts
of
result land was
ages were
the accumulated
stocks diminish¬
ed.
Nevertheless,
long
time
above 60c
prices
for a
much
bushel, and then fol¬
did
a
not
recover
lowed the short crop of 1897 on a
small acreage.
which
at
to
sold
followed
was
vance
September wheat,
start
the
bushel,
at
by
or
for
62c
an
a
ad¬
period of
a
price levels
an
were
were en¬
extent that acreages
export
our
increased,
continually
markets
if
of
and
improved.
shipment abroad.
able
to
not
been
profitably.
produce
therefore,
.
the
three-
period, ended Oct. 20, 1947,
they acquired 52 million bushels
wheat, or more than was shipped
annually during all but one of the
war
years.
This in my opinion
was
responsible for the 25c per
bushel ^upturn in the market at
that time when men in high office
were
accusing
speculators
of
gambling in grain.
I have al¬
ways maintained in our industry
that it is not possible for any one
man,
any
or
all the
agency to know
Surely it is bet¬
safeguard¬
one
answers.
ter that the business is
ed
when
firms
individual
of
thousands
operating at their own
risk, each coming to its own de¬
cision, rather than to have one
organization, or one entity, trying
to figure out the time when it is
proper to buy or when we should
enlarge our export operations.
are
The
government's
the market last
activity
season
had
a
We
conclude
that
in
tre¬
mendous
bearing on prices.
We
largest wheat crop in
history; about 300 million bushels
raised
the
remained
used
the
on
seed
for
moved
ance
and
was
The
bal¬
farms
feed.
or
but
market,
to
for
two cars that came forward,
every
the
Federal
We
exported
bushels
think
agencies bought one.
nearly 500 million
wheat
what
that is:
a
It is
flour.
and
quantity
more
big competitors.
bushels
in
mere
Canada
which
more
it
Just
of
grain
than the
com¬
Ar-'
two
It is 130 million
than
this
bushels
is
consumed
as
we
woman
500
Looking
million
wheat
as
is
by every
child in this
year
and
bread and Cereals. It
is also five times
.-•.v.-
raised
a
do.
way,
much
each
be
country
exports much
ordinarily
another
will
year,
wheat than
man,
must,
In
week
country for
farmers
bushels
when the Commodity Credit
Corporation purchased such tre¬
mendous quantities of grain for
the
had
ef¬
more
year
Surely, this would not have been
case
have
million
20
on
tirely satisfactory to producers; in
fact to such
bushels
following bined annual production of
until the gentina and Australia—our
the
$1.75
Spring. From that time
sixteen years
million
at
purposes
so that since that
have not had the export
we
handled by the private trade.
was
best brought out
last
stand
suffering from First World War,
strain,
Argentine,
outlets
were
private
can
Established 1913
.
46 Front
BUREAU, Inc.
are
chain
one
wonder
unfortunate
animals.
L
Little
mental
those
constant
a
emergencies,
people
many
some
NATIONAL QUOTATION
years
the other.
For 35 Years
Emergencies
the
time
than
more
informed
We
competitor. However,
high prices that pre¬
the
was
5
a
that
Wessel.
it
fect
With
Orleans, but yet the
7%
1955, that, people were calm because they had
been told that there was possible
that the firm of Stirling, Morris & through the sinking fund, $230,500
principal amount of these bonds danger ahead. We have seen that
Bousman has not been dissolved,
even
have been drawn
animals, lacking wisdom, re¬
by lot for re¬
&
up to that
since she has been
ever
keenest
business.
depressions in the
past, and for example, in 1894,
wheat values declined sharply to
about 45c per bushel, which was
a
ruinous price to the farmer,
although he did not suffer any
Morris
record
a
ernment'competition with private
the
great
so
The
Redemption
than
war
The
had less
us.
fore¬
are
ance
Guaranty Trust Company of New
Wessel, Jr., were to become active York, as Sinking Fund Adminis¬
trators, are notifying holders of
in a new firm to be
and
this
Meanwhile,
restlessness
find confusion and
serious
govern
before the
ij
can neither start nor
spread.
government is cognizant of
this in certain fields. The Weather
Belgian Bonds Drawn
began its
Canada that year ex¬
was
time, and
our
say
now
year
we
In such
.
business
Board
ported 407 million bushels of wheat,
that not
legislator
the alphabetical agen¬
that
orous-
world,
with the situation when it
In the "Financial Chronicle" of
operations.
which
learned
name
the
come
every
blossomed
most
cies
however, a
in this great
country of ours, with
the standard of
living ten times
greater than in the poorer half of
shock
bad
nearly
to
venture
the
enterprise
J
v-.
n
a
second, by-^senseless and unnecesparadox that sa^^eg^&Qiapon; third, by gov-
success
inside before it
/-vv%
is
bureau
can
too
is,
warned
make
can
You've got to believe in
You've
vJ
r>
I
order.
even
government
because Jn a
public problem is
no
nor
when
new
a
understandressive
we
man
of
gone
Farm
in
forth in Washington by executive
dangerous for. in
public discussion and
VU
lack
The
of
times
were
week
alone
This
us.
I^dare
-
things,
society
secret
TRYING UNTIL YOU SUCCEED.
own
of wealth
that had
Americans
today
are
restless."
these
free
The third mental requirement is not to be
discouraged. If you
believe in what you are selling, and if
you know that you want to do
a
good job for your fellow man, YOU ARE GOING TO KEEP ON
sion, his business, his
the
the
first real
our
panded acreages, not only in Can¬
ada, but also in Australia and in
and
happiness,
and
peat
sales
a
all
when
had
we
government
income-producing property. The
property is in the 48 states, and,
under our free enterprise system,
is
owned
by
the
145
million
people
in
this
country. - There
ing.
or
the accumulation
to
ex¬
spectacle
two
"lead horses" on their team.
else is doing it they want to
try
it too.
If you have an office full of chair warmers
who sit around
and bemoan the fact that business is
slow, and
one
a
of
vailed during the First World War
that
brought about greatly ex¬
long they find it hard to bring themselves
enjoy wide¬
positive thinking and action. Most of our financial leaders
spread prosperity and an era of
d© not indicate
by their public utterances that they still believe
good business.
-wholeheartedly in the future of private enterprise in this country.
Strangely, there has been ap¬
That is what has happened to sales
organizations in many cases—
prehension for two or three years
they don't believe in themselves, their merchandise, or their
country that all was not
well, and that
any more. BUSINESS HAS TO BE DEAD UNDER SUCH CONDI¬
inflation and boom might
big;, fol¬
TIONS.
lowed by bust and industrial
Re¬
The second mental requirement is what our
friend the Captain pression. It was about a
y£gr,Mo
meant when he said, "The better I felt the more I
sold, and the more that the Honorable JosepT.
J sold the better I felt." You have to
"get rolling." You have to get Kennedy told the Congress: "The
the feel of selling. One sale
brings on another. You acquire momen¬ American
people^g&ee described
tum as you go along.
That is the reason sales managers who know as
a
magnificent
so
some one
Within
1929,
taste
before
around to
their business like to have
When the also rans see that
our
state of affairs, because the Fed¬
eral Government, as such, has no
isting, it leads
to a high level
of confidence,
today is due to the
They
-
conditions
reasons
engaged in the investment business.
disorders.
In
that the
had much to do with
Generally
doing.
are
only fair to say
war
raising wheat brought them satis¬
factory returns.
with these two
First,
you must believe in what you are selling and what
You must be convinced that when
you trade your
securities for another man's
money that he is going to be better off
you
is
balance
our
comparatively short space of time
we
became burdened by an in¬
debtedness, which was equivalent
61
million people
fundamen¬
success. If these mental conditions are
RIGHT, and given even
fair amount of intelligence
plus the will to work, results are sure
&
''is:.-:
v-
Leading grain authority attacks record of government intervention in grain market and its competition
private business.
Lays serious fluctuating prices to government buying, and says government's
activity in market has predominant bearing on prices. Criticizes parity price support program as set
a
result of three years as a
Jap POW, has written
Several weeks ago we made the observation
believed that there was such a
thing as brain waves between
we
'
President, Chicago Board of Trade
interesting letter.
people, and
Thursday, October 14, 1948
(Continued
as
great
on page
as
38)
our
,
Volume
THE
Number 4742
168
COMMERCIAL
indicate
a
,
•
.
.
By A. N. GENTES*
.
Vice-President, Guaranty Trust Company of New York
'
•
1
1
are
world back to
a
disintegrating effects on international trade, and sees hard fight ahead to get
multilateral trading basis.
Holds present world disruptions make necessary exchange
restrictions in various countries
Speaking on Oct. 4 at the Annual Meeting of the American Trade
Executives, an organization whose membership is com¬
more than one thousand executives of the nation's trade
as protection against
flight of capital. Advocates greater imports into
ECA requirements regarding exchange guarantees. Concludes obstructive tactics
U. S. and explains
of Russia have hindered advancement of world trade.
Association
prised of
.
of
Bank
Chicago,
the
pictured
business
out¬
look
con¬
as
tinuing at its
present level
for
at
least
a
despite
year,
"unmistakable
signs of weak¬
ly on our own export trade in this country and some of the
penditures will rise further over to get the world back on a sound trading basis.
First, let me
the next year, there is much less
are
in agree-^to maintain our economy here and
ment
that
a
uniformity in opinion as to the
extent of
further probable
de¬
substantial in- our important position in world
clines in agricultural prices and
t e rhational affairs, the economic weakness of
trade
is nec¬ continuing to export to countries
income, and particularly the effect
thereon of the government price
essary for the of the world beyond the capacity
support
program.
How
much
support of our of those countries to get the dollar
own
tighter credit conditions may be¬
economy
exchange was also recognized.
come
is a matter of widespread
Were it not for the fact that
in this coun¬
speculation, with increasing rec¬
"Prospects ognition, however, that further
ness."
continued
for
high levels of
general busi¬
and
ness
Walter E.
em¬
ployment dur¬
ing
the
re¬
Hoadley, Jr.
and well into
remain favorable, Mr. Hoad¬
mainder of this year
1949
"Strong inflationary
persist from stepped-up
government expenditures for for¬
eign aid and defense plus an un¬
abated willingness and ability of
ley
stated.
pressures
most
firms
business
and
consumers
to
spend,
although with
selectivity toward goods
having the greatest
marked
services
and
Equally
apparent, however, are unmistak¬
able
signs of weakness, arising
price and quality appeal.
credit restraint
to
be
a
can
for
try,
the
improve¬
and may prove
dominant
anti-inflation¬
ment
s
force in coming months. In¬
creasing reports of some slacken¬
ing in industrial construction and
ary
of
t and
of
the
i
a
iiving
tions underlying
abroad and
outlays are being
world
peace
publicized, leading many to con¬
or
peace
A. N. Gentes
clude that the peak in the postwar
throughout
durable goods "boom" has been the
world.
reached and a steady decline is in
During the period of the war,
prospect next year.
Heavy ex¬ many changes occurred in the
pansion programs of utilities, the economy of nations—changes in
need for cost reducing machinery,
politics, finances, monetary and
and competitive conditions, how¬
financial
policy, commerce and
ever, point to further large-scale
transportation, all of which will
plant and equipment projects.
have a very material effect on
"While the period ahead prom¬ our own export business and on
ises to be oiie ofcontinued good international t r ade for
many
years to come.
The war also
and
observers
them, many busi¬
anticipate a
now
some
brought about an
prospects that essential non¬
food
items
political forces.
current and
of
fears
"Business
it.
forthcoming 'readjustment' are not
Consumers
public.
by the
shared
generally
evidence
now
It
postwar
avoid
may
now
seems
only viduals
period
businesses
getting
'hurt,'
and
but
to
indi¬
there
of
sharply lower
prices during the months imme¬
diately ahead, and therefore see
little point to indefinite postpone¬
ment of desired purchases—thus
is still time to minimize the im¬
constituting a major sustaining
force.
A
dangerous attitude of
economic complacency rooted in
tain
minor
hope
government,
moreover, seems to be growing in
this country, no doubt attribut¬
able to the now long record of
huge government spending as a
key element giving support to em¬
reliance
broad
and
actual
course
of business
employment during the next
likely will
six to nine months very
by developments in
general economic and politi¬
areas:
(1) government ,fiscal
be determined
four
cal
position, including expenditures,
particularly for overseas rehabili¬
tation and defense, and tax re¬
ceipts, (2) farm prices, (3)
credit
restraint, and (4) business expen¬
for plant and equipment.
Differences in the business out¬
ditures
by economists and
present time almost
invariably can be traced to con¬
flicting viewpoints as to the de¬
gree of strength or weakness to be
look
as
of
Above
coming
readjustments.
seen
to
of
each
points. '
"While
agreement
which is
now
practically stopped, would have a
tremendously important effect on
the
world
whole
recovery
pro¬
effects of these dis¬
ruptions in various countries must
The
gram.
be
taken
into
consideration
by
all, it is important to avoid American
exporters when endeav¬
tactics to sus¬ oring to determine future poli¬
business at
the
peak of this
boom."
cies.
World
Firm Name Now Is
trous
Corp.
these
four
•
there
that
....
of
wake
Cist. Mun. Bond
rather
essential
or
purchase
author¬
of
non¬
luxury goods and foi
or
purposes other than rehabilitation
and stabilization of internal econ
omy.
.
It
v,;-
;
is
estimated
American
'
that
the
Latin
had about $5
area
currency,
goods and services in the United
merchandise
States
cept in limited quantities.
In a number of countries in the
a
War
States
II, the most disas¬
wars,
tional trade and
we
payment in
dollars
a
or
United
currency
freely convertible in the exchange Latin
market for
United
For
States
exporters
example,
United States
dollars.
in
the
have
a
long,
hard fight ahead of us to get the
CINCINNATI, OHIO—The firm
world
back
on
a
multilateral
hame of Katz & O'Brien, Inc.,
trading basis comparable to that
Carew Tower, has been changed
which existed in the prewar pe¬
and
American
machinery
area,
ex¬
American
exporters who sold in good faitl.
on
a
dollar draft basis now finer
are unwilling as
a the return of dollars seriously de¬
general rule to accept payment in layed by reason of inability o
pounds or francs or gilders or the part of the foreign country t <
pesos or other foreign currencies, provide the dollars.
It has been estimated that thr
which, if there is any chance that
.
those
will
currencies
become
Argentine has committed itsel *
for $300,000,000 to $500,000,000, fo
not subject to free sale in which
they must
eventually.
a free and open market.
somewhere, find dollar exchange
In Brazil, it is estimated that
Experience is a hard teacher
and many exporters who, for one they are committed for
approxi¬
reason
or
another
across
the mately i. $250,000,000,
for
whicl
years,
have been compelled
or they
must eventually find dol¬
have voluntarily taken payment lar exchange.
in local currency, have suffered
A report as of June 30 of this
severe losses when they
endeav¬ year on collections outstanding ii
ored to conveft those currencies Brazil showed a total outstanding
blocked within the foreign coun¬
are
back
dollars.
into
in
collections
alone
000.
Before
our
of
commenting further
on
export sales, it may be
interest to mention the usual
own
terms of sale accorded by Amer¬
ican
exporters
to
Undoubtedly
that
Export Terms of Sale
amount
substantial
drafts is
cally
was
$205,000,-
good part ol
past due.
A
amount
now
all
of
a
of
dollar
backed up in practi¬
the Latin American
including,
of
course,
of
countries
buyers
abroad. Argentina and Brazil, which per¬
out haps have the
larger amounts
country are financed either involved.
The greater part of our sales
of this
the
on
basis
opened
favor
by
of the
letters
of
the
seller in
try or on the basis of
drawn by the seller
buyer abroad.
In the
case
credit
no
of
credit
buyer abroad
this
As
a
American
curtailed
ship¬
consequence,
in exporters
coun¬
have
ments and
probably will continue
dollar drafts to curtail shipments until the situ¬
here on the ation rights itself. The desire on
y
the part of
of letters of credit,
risk is involved, as the
foreign buyers to pur¬
chase
merchandise
our
exists,
but
the
still
marked
shortage
of dollar exchange in practically
shipper obtains his funds in this
country
upon
presentation
of all countries of the world har
documents to the bank opening forced a further
screening in thos<
the credit.
Documents, of course, countries of imports from ^ the
must be drawn in strict conform¬
United States and the imposition
ity with the terms of the credit of more stringent foreign. ex¬
and
within
the
maturity date change restrictions.
specified on the credit. The risk
Some Exchange
Restrictions
of obtaining dollar exchange
is
eliminated.
In
the
case
Essential
'
of
dollar
drafts,
While in
quarters we arc
criticize
foreign
ex¬
risk of getting dollars back to the change restrictions, and while un¬
States remains with the shipper
doubtedly certain abuses do exi?
until eventual return of the funds in certain countries, preser'
in dollars to the United States.
world disruptions make it neces
however, the credit risk and the
brought in its
disintegration of interna¬
all
desire
some
to
prone
Naturally, in times of exchange sary that exchange restrictions tr
stress
abroad
or
when conditions
in effect in various countries
as
:
the flight o
clined to ask for letter of credit capital,
exchange
depreciation
to the Cincinnati Municipal Bond
and depreciation of gold reserves
riod.
financing and it is the safest form,
Corporation.
The firm continues
Our exports out of this country or perhaps I might say one of the all of which have an inflationary
to act as underwriters and dis¬
on
the foreign countries'
in 1947 amounted to about $14 l/z safest forms of financing if it can effect
tributors of state, municipal and
economy.
billion, which is the highest fig¬ be arranged.
revenue bonds.
Furthermore, if restrictions ar
ure
we
have ever had in this
Unfortunately, when dollar ex¬
Officers
are
Arthur V. Katz,
country and which probably will change conditions are tight within properly handled, they provide
President
and
Treasurer,
and
for the conservation of dollar bal
be the highest that wq will have a country, it is difficult for ex¬
Francis J. Lynch,Vice-President.
ances within the foreign country
for a number of years to come.
porters to obtain a letter of credit
Mr.
Lynch,
who
has
recently
The decrease in the export of from abroad and they are forced for a fair and orderly allotmenJ
joined the firm, was previously a
of available exchange, and they
manufactured
products in 1948 to sell on a dollar draft basis or
Vice-President of Kline, Lynch &
assure the foreign country of ex¬
came as no great surprise to those
forego the business.
Co., Inc.
change for essential merchandise
experienced in international trade.
Edgar W. Leonard Dead
For, while it was realized that a
sound, substantial export business
must be done out of this country
Edgar Welch
in
Leonard, partner
Moore, Leonard & Lynch, died
the age of sixty-seven after
illness
of
few
weeks.
Mr.
*Transcript of address \ by Mr.
Gentes before monthly meeting of
unfavorable,
are
sellers
are
in¬ protection
Effects of Dollar Shortage
an
a
*
the
or
against
essential imports.
It
is
likely that any one
nation of importance in
the world today can long main¬
use of their free gold and dollar
tain its position in world market?
exchange b a la nces that were
available to them at the end of without having exchange restric¬
tions of one kind or another, un¬
World War II.
They were esti¬
mated at about $20 billion. ' In less they have a substantial gold
It cannot be said that all coun¬
tries
of
the world
made
discreet
Export Advertising Associa¬
Wide .Leonard was resident partner of tion,
Inc., New York City, Sept.
29, 1948.
*
government ex¬ the firm's New York office.
many cases, in: the postwar period,
is
the
bil¬
country of the world has its lion at its disposal at the conclu¬
banking and mone¬ sion of World War II, and tha
tary systems, the matter of inter¬ total ,had been utilized to such i
own
also
Disintegration of International
Trade
at
.
markets,
using 'depression'
others at the
ascribed
world
to
upon
ployment and income.
"The
pact
The movement of these products
too late in this
inflationary
some
for
each
try,
ness in and out of those countries.
gain at the ex¬
Here I might mention particu¬
moderate general business down¬ pense of other goods and services
larly the Netherlands East Indies,
because of agricultural commod¬
turn next year."
or
what is now known as the
Continuing
his
survey
Mr. ity price declines. Consumer re¬ Republic of Indonesia,'which was
sistance to luxuries and further
an extremely large source of raw
Hoadley remarked further:
saturation of markets as produc¬
material for all parts of the world.
"No prudent business executive
tion
catches
up
with
demand
The islands,
as
we
may recall,
can fail to recognize the eventual
backlogs suggest more scattered
were large shippers of rubber, tin,
adverse implications of more than
readjustments in numerous in¬
three
oil, palm oil, copra, quinine, pep¬
postwar
years
of record dividual business lines.
American inflation.
There is little
per—to
mention the important
"Business and the nation will be
reason
to
believe
that present
products.
These products were
particularly responsive to any (1) sold to- all mparts of the world, but
levels of business are stable and
unexpected development leading were
particularly important to
enduring.
Yet, no broad business
to a marked rise or fall in over¬
the econoiiSy of Western Europe,
downturn seems imminent because
seas or defense expenditures, and
and
more
of
the
particularly
to
the
apparent underlying
strength of prevailing economic (2) lessened availability of cred¬ economy of Holland and England.
ness
ized
s
national trade and international great extent in the
past few year:,
of financing would be a great deal that many of these countries art
less complex.
now in the position of
being-un¬
for
Normally, however, sellers of able to purchase even essentia^
slo.wing up
initial
some
exchange was utilized
countries
in satisfactory results in all but the awakening of peoples in various
the over-all demand for "heavy" remaining fields of critically short parts of the world, and I have in
goods, mounting consumer resis¬ supply—and in these production mind the disturbances in India,
doubt will limit
tance to particular products, and bottlenecks no
China, French Indo-China, Neth¬
numerous
instances
of
market sales and earnings. Increased com¬ erlands East Indies, Burma and
saturation with goods. Because of petition for the consumer's dollar the Arab World, which have seri¬
these 'soit spots' and the condi¬ can be expected to mount, with ously disrupted the flow of busi¬
from
factors that will be necessary
that most of us, I believe,
say
rd
allied equipment
general business, it will take more
work by all concerned to achieve
v
In my discussion on the pattern of international trade, I would like to comment brief¬
V
association, Walter E. Hoadley, Jr., Business Economist of the Federal
Reserve
17
Mr. Gentes reviews war's
unmistakable signs
downward turn later next year.
Chicago, however, that there
(1549)
''
Chicago Reserve Bank Economist tells American Trade Association'
of weakness that may
CHRONICLE
The New Pattern oi International Trade
No Early Drop from Present
Business Levels: Hoadley
Executives at
FINANCIAL
&
not
trading
y
-
(Continued on page 28) v
I'
i,!.
t
I
18. (1550) ;;
THE
<
Avvi,,;
I
COMMERCIAL
&
FINANCIAL
CHRONICLE
.w
Thursday, October 14, .1948
showed
13,400,000 shares of ordi¬
stock valued at $335,000,000.
this, American investors held
39.19%, as compared with 13.58%
held by Canadian investors. Since
then, however; there has been
nary
Of
Canadian Securities
Still
"It
By WILLIAM J. McKAY
Although from
discussions
with
nevertheless
the
Sir
the
Canadian
angle, the results
Cripps were frankly
Stafford
Dominion's
economic
future
of the recent
disappointing,
is
course
now
become
more
clearly defined.
Nothing less than a complete reversal of the present
economic
policy
would ^
British
suffice
to
Canadian
It
the
arrest
towards still
dency
is
natural
economic
tered
ten¬
closer U.
S.¬
stocks
even
and
collaboration.
the
in
that are obliged
Britain has pinned her hopes for "arbitrage"
recovery
on
intensified
indus¬ relation to
trial
development
within
the vailing on
United
Kingdom sustained by the
of
the
Sterling area.
Even with
event
Dominion
the reestablishment
of
the
price
the
levels
the
internal
would
istration
which all
of
In
bonds
...
reached
adulthood.
It
should
now
ish attitude to
create
to
serve
a
practical and realistic under¬
more
standing
<
British
the
between
Commonwealth
North
the
and
American continent.
.Canada would be4n
In this event
ideal
posi¬
tion to fulfill its logical role as in¬
terpreter
the
of
"
point.
mar¬
take
advantage
of
this
an
British
vital
flow
concern
ment that
is
will
It
then
termination
of
be
given
to
of
one
ex¬
rate
of
In
this
o
n, Presi¬
dent.
The
club,
accord¬
ing to its con¬
barriers
stitution
Winston
a
ada
would be
and
U. S. capital with freedom of
more
readily
many
SybiJ Gordon
itself
opportunities north
economic
a
1
Freight Rate Puzzle
Says Canadian Pacific points out its anomalous position of being in
competition with the larger government-owned Canadian National
is
Co.,
and
offi¬
of
members
"The
Ciarlo
Mary
asso-
Stearns &
Bear,
charter
are
addition
In
who
Gordon
with
other
cers
border.
Domin¬
Miss
ciated
invest¬
of the
avail
ment
the
bond business.
the millenium
on
en¬
in
nunicip
to
8.P.R. Olivines Canadian
n
o
the
gaged
clearly established,
would
of? the
t i
a
women
always been Kremlins
time."
our
to
asso-
among
true.
come
i
c
much better world if such
We should be wise not to count
"in
was
encourage
the
way
and
by-laws,
organized
Govern¬
their counterparts to prevent the consummation.
or
exchange
With the implementation of a
comprehensive
U. # S.-Canadian
the
d
value of U. S. investments in Can¬
repatriation
agreement
by Sybil Gor-
every¬
family.
—
York
announced
closer
But heretofore there have
which would be applicable for fi¬
nancial
as
well
as
commercial
transactions.
is
If it has not
areas."
Municipal
of New
of
and is fortifying them
larger
ever
It would doubtless be
change restrictions and the estab¬
lishment
materials
raw
brothers in the human
dreams could be made to
the
Canadian
all
over
the
of
Churchill.
of
to both countries.
as.
has set them up
day
every
the
across
directions
to
access
Formation
Bondwomen's Club
been attained, if on the contrary, enormous
have been erected against it, it is the Soviet
is possible therefore that consider¬
ation
view¬
_
of funds
both
in
freest
Club Formed in N. Y.
Winston Churchill
"That still remains the aim and ideal.
general economic agree¬
ment, adequate arrangements for
free
Munc. Bondwomen's
kind and that the Russians would be
every
nadian
border
the
where received
Within the scope of a U. S.-Ca¬
the
>
ac-
to unfrozen waters in every
have
compensate j for
will
lucrative,
continuing losses accruing from
unprofitable operation of its;21,000-mile railway empire.
•
?
VVH'/V,;
hoped she would have
would
narrovy market which exists here
of bonds.
associa¬
tion with this country is not only
the logical course but one that is
virtually
dictated.
This
by
no
means implies a severance of the
strongly sympathetic Canadian tie
with the Mother Country.
On the
contrary a natural working part¬
nership between this country and
should
to
on
ocean, guaranteed by the world
organization of which she would
be a leading member; that she
liqui¬
for this catagory
out Canadian volition in the mat¬
ter, and closer economic
Canada
then
the free
own
large degree rules
a
and
on
cess
procedure, together with prewar
economic holders, have recourse in the event
of sale only
to the exceedingly
the current Brit¬
its
map
Canada
proceeds
"I
y
For-
On the other hand those who
failed
is
However
course.
ket.
only appropriate
that
the
Dominion
therefore
-
in
date the
event Canada has now
the
stage
of economic
any
company
set and
are
de¬
membered, is, still a transportation
and
no
returns from
"outside"
investments,
however
to
alded with his declaration of the
Four Freedoms.
Control
change triangle,
Canada
would leigm- Exchange
Board,
it
still play only a minor role in the when
existed, can sell their
British economic scheme.
honor
which President Roosevelt her¬
also
Canadian
hearts
our
extensive oil
of
news
its lands in '/Al¬
berta.
Undoubtedly
American
holdings of the stock have in¬
creased since the last, report.
Canadian Pacific, it must be re¬
valor, fortitude and
that she would help
bring about that golden age
Those who took
with -the
the
the
velopments-on
patriotism of her people-have
advantage of the privilege of-reg¬
a
all
activity in the stock on the
board, and it was not
York
long ago that C. P. touched $19
so
factors in
she
won;
pre¬
is
the
much
New
on
four supreme
or
that
peace;
receive
which
market.
holders
bonds
of the three
one
an
liquidation
Canadian
of
highly confusing.
on
working basis of the time-honor,cd
U.
S.-British-Canadian
ex¬
in
are
rates which have little
The .situation
resources
bonds
to sell at the various
clear
reasonably
now
and
Dream
a
my
preserving
embarrassing position,
more
Only
dream during the war years, when we
were all united
against the Hitler onslaught, that
after the war Russia, whatever her
ideology, should
was
Bond
Buyer,"
Vice-President;
Marilyn Madden of Union Securi¬
ties
Corporation,
Vera
M.
Secretary,
and
Shields &
of
SmUh
Co.,
of Governors
being Marion Ford of Glore, Forgan
& Co.; Cathleen Moiin of
Treasurer;
Board
Railways. Says it alone must carry the ball for higher freight rates.
perturbation
con¬
During the week there was an
exchange reserves intensification of the demand for
According to the Canadian Pacific Railway, American investors
short-term
Smith. Barney & Co.; Marion St.
largely dissipated. Con¬
high-grade
external
may find more than a passing interest in some vital matters affect¬
Pierre of Heller, Bruce & Co., and
sequently it would then be possi¬ bonds but offerings continued in
ing the earning capacity, if not the very future life of that $1,650,ble to conceive a bolder approach
Anne C. Van Vechten of Braun,
scant supply.
The internal bond 000,0Q0 transportation empire, the Canadian Pacific.
to the solution of the allied prob¬
Bosworth & Co., Inc. Officers and
Privately-owned, Canadian Pa-<?
section
registered
little
change
lems of the unsatisfactory "free"
the Board of Governors have been
cific is in the anomalous position talled another
$24,788,927, but af¬ at work for several weeks and the
Canadian dollar market and Can¬ and the failure to respond to the
of being in competition with the ter paying fixed
charges and divi¬ club now has 26 members.
ada's indebtedness to this country recent
firmness of free funds r.ey
largest ,government*»owned Cana- dends Only $20,636,260 was trans¬
in the shape of the large volume
An
invitation
fleets the absence'of actual in¬ d ian National Railways.
is; extended to
ferred to profit and loss account.
of Dominion internal bonds held
ion's
current
cerning
would
S.
U.
be
.
:by U. S. investors.' At the
ent time the
means
vestor
of repatriation
of U. S. investments in Canada
not
give
are
only inadequate but they also
rise to considerable confu¬
sion.
In the
sible
to
where it is pos¬
cases
repatriate,
the
narrow
state of the free market often
the
poses
seller of
demand.
pres¬
ex¬
free, funds
to
indeterminable loss and difficulty
of execution.
Holders of unregis-
four
as
is
In, view
point premium
the
possibility
category
registered
on
dian National share Canadian Pa¬
of the additional
cific's
den.
of switching
against
the
of
other,
which would give rise to a supply
of free funds and thus tend to de¬
the market for unregistered
press
bonds. Stocks in general displayed
somewhat firmer tone with the in¬
dustrial
fair
CANADIAN BONDS
demand.
On
issues
in
the other hand
the
golds
lost
of their recent gains.
W. M. Robinson To Be
GOVERNMENT
NASHVILLE, TENN.
y
—
CORPORATION
becomes
ford
&
a
on Oct. 21
partner in J. C. Brad¬
Co.,
418
Union
Street,
members of the New York Stock
CANADIAN STOCKS
This
leaves
Canadian
Pacific
carrying the ball in the continuing
struggle for higher freight rates.
The C. P. R., after a 17-cents-anhour pay boost granted to
16 rail
unions, last July, but made retro¬
active to March
1, immediately
asked the government for a fur¬
ther advance of 20%
in freight
rates. They stated flatly that with¬
such
a
is
It
rate increase,
an
on
immediate,
on
an
at least
and if
interim
basis,
easily face bankruptcy.
difficult to real¬
ize that a company whose ordi¬
nary
stock has. been regarded
perhaps
.
,
abroad for
as
n
more
reliable
thin and
Yet
than six decades
index
of
conditions
a
Canadian
can
be
short time to the
ragged edge.
Canadian
Pacific
of
,
New York Stock Exchange
Weekly Firm Changes
INCORPORATED
The New York.Stock Exchange
has announced the
TWO
NEW
-
-
r
*
WALL
YORK
'
*
*
"
4-2400
C
k
;
*
"*
.
f
NY
\
■'
changes:
5, N. Y.
4.'
\
WORTH
STREET
>
1-1045
Louis J. Groch
following firm
;
...
,,
'
will retire from
partnership in Bennett, Smith &
Co., on Oct. 15th.,
- >
Interest
of
the
late
Benjamin
D. Mosser in Clark, Dodge & Co.
ceased Sept. 30.
Canadian
material
have
costs
last March
increase of 21%
Transport
granted
an
cifically exempted grain and grain
products moved within western
Canada whether for domestic con¬
sumption
export. As Canadian
Pacific is heavy involved in west¬
ern
trackage, the raise, for earn¬
ing purposes, actually works out
or
at closer to 16%
Even
a
granted
since
the
in
third
the
first
raise, which is
of rate
1939
to
eastern
boost
the board.
across
this slight
roughly
roads
Commissioners and
who
nicipal
bond business in
capacity
the
to
increases
U.
S.
rail¬
region, and
allowed
Canadian
to
Cana¬
provinces,
tario
Quebec.
except
On¬
Ther premiers
contend that Canada's whole basic
freight rate structure is unsound,
that it favors Ontario and Quebec
at the expense of the western and
a
royal
the
become
a
mu¬
senior
members
of
Membership applica¬
tion blanks may be procured from
Marilyn
Madden,
Walsh lo
Secretary.
provinces.
They want
commission
to
examine
whole
question
of
freight
rates, setting aside meanwhile any
Represent
Television Shares Go.
Reginald L. Walsh has been
pointed
wholesale
of Television
ap¬
representative
Shares Management
principal;; underwriter
Co.,
for
Television
England
Fund,
Inc.. in /New
and upper
New York
Mr.
state.
Walsh
has
had a long
wholesaling of
experience in the
investment company shares.
viously he
lock
and
is still under
heavy fire from premiers of seven
maritime
are
group.
dian rails since 1922,
and
active in the
women
railways
the Ottawa government to set pp
officials
have filed figures with the Board
A. E. AMES & CO.
past,
skyrocketed.
were
brought in such
Co.
distant
in freight rates, but the boost spe¬
ville
&
Also, with Canada's war¬
price controls a thing of the
time
the government.
economic
Corp. which re¬
cently merged with J. C. Bradford
pay
more
effect, at least, to go run their
railroad and leave rate-making to
Exchange.
Mr. .Robinson
was
formerly an officer of the Nash¬
Securities
those
in
necessary,
McLaren Robinson will
that
rates permitting
a
profitable
return, but they have been told,
C. P. could
Walter
conviction
at
out
J. C. Bradford Partner
MUNICIPAL
firm
using railroad services should
15%
PROVINCIAL
'/,
base metal
Oils ' and
Western
some
•
and
than $10 million shy
1948 wage bur¬
Operating officers of the Cana¬
against unrecorded bonds there
one
This is
the
of
with
was
Pre¬
Calvin Bul¬
Hugh W. Long & Co.
Phi la. Securities Ass'n
To Hold
Meeting
PHILADELPHIA,
Philadelphia
tion
will
Nov.
15
Co.
p.m.
Trust
—
at
the
Harld
Dillon
The
Associa¬
meeting at 4:15
a
with
Eastman,
on
PA.
Securities
hold
&
Provident
H.
Co.
Young,
speaknig
utilities.
the Canadian cabinet
proving that demands by the railways for in¬
award, latest in a creased rates. Recently they suc¬
round of pay boosts, add another ceeded
in
having the transport
$32,000,000 to 1948 working ex¬ board,
which
functions. like
the
July
wage
.
penses.
America's., ICC,
Jan.
11
P.
R.
over
until
the
C.
set
1947, showed a net of
only $22,892,189 from gross earn¬
ings (railway) of $318,585,919. Its
"other income," from outside in¬
hearing on the rail¬
ways' application for a further
20% rate advance. •*'
-
vestments
represents
C. P., in
notably
Consolidated
Mining & Smelting, and its opera¬
tion of hotels and steamships, to¬
this delay alone
least a $16,000,000
says
at
loss.
Canadian
Lee
Higginson Corp. Elects
At
a
meeting of
1947
report
Board
of
Higginson Corp.,
40 Wall Street, New York
City,
N.j Penrose
Hallowell,
former
President, was elected Chairman
of the
ting,
board, and Charles E. Cotformer
Treasurer,
Pacific's
the
Directors of Lee
Vice-President
was
and Treasurer.
and
elected President
COMMERCIAL
THE
Number 4742
Volume 168
still
Says Industry's No. I Problem Is to Earn Enough
For Capital Replacement
of
a Director of Sun Oil
of Philadelphia at a luncheon
meeting on Oct. 7 that American industry's No. 1 problem is to earn
enough money to assure replacement of its plant and equipment at
President and
former
Pew,
Company, told the Financial Analysts
the
of
cost^
high
present-day
construction..
Citing actual
figures
at
that
show
Jan.
to
1 9 4 8,
1,
construction
the
costs,
re¬
of
production
a
plant
and
equipment in
United
the
would
States
Howard
J.
,
Pew
the
original
in
investment
:o
,
of
178%
cost
facilities, Mr. Pew de¬
industrial profits
present
clared that only
this difference be¬
actual
replacement costs
make
can
tween
up
depreciation
allowable
and
re-
•'v.v
serves.
Pointing
out
industry's
that
Dr. Emerson P.
Drawing
parallel
sharp
a
stantial
capital be¬
tween the wars, Mr. Pew stated
that, "What has happened in Eng¬
land
can
happen
here, if the
American people refuse to permit
industry to earn such profits as
may accrue from the free func¬
tioning of competition and the
laws of supply and demand."
"Upon the solution of indus¬
try's replacement problems," he
said, "depends the survival of
America's living standards."
which
try,
lived
Some
operating
on
The
on
is
same
coal
of
true
the
case
meat,
uncertain.
In
ber of Commerce of
ment, sees a growing
favorable
Says
ate
outlook.
Schmidt
Dr.
his
in
report:
"T h
i
e
m-
look
ous
capac¬
is
ment
very
strong. Never¬
in the
theless.
60
last
days
there has been
something
Schmidt
E. P.
Dr.
future.
long-term
a
decline
,
of
in
optimism for a
Whether this
"Our
begin
outlets
investment
to
"A
from
year
now,
hog prices
per
ities
which
have
not
yet
beeii
eliminated.
is
traceable
to
the
"From the beginning of the de¬
international outlook, or
pression until about two years ago,
to the stock market doldrums, or we
probably consumed capital on
to some other factors, is hard to net balance. In the last few
years
determine.
If the stock market we have had the most vigorous
explana¬ capital expansion in
is to blame, we need an
tion for its sluggishness.
confidence
may
generally are spending theii
promptly, are not hoard¬
ing and will net hoard income.
Production
always
finances its
own
consumption provided com¬
ple
incomes
governs prices
and no
substantial amount of income is
petition
substantial,
whole con¬
borrow additional funds
to
n.et balance, invest¬
ment is exceeding savings and no
income is being hoarded.
"New investment in manufac¬
so
that,
on
turing plants and
equipment has
gone
in
shows
the
some
two
history.
have
Thousands
up.
tities of
"We
have
table
hold
experienced
revolution
a
both
pork
and
beef
are
in
ago
the
foregoing
reflected in the
inventories.
of
non-durable
soft
new or¬
For
manufacturing,
orders
July
exam¬
the
new
goods
in
slightly below a year
but inventories were up 17%.
were
of durable
case
reflected
avoid
in
goods, new
and inven¬
favorable
more
prices,
a
of
providing
con-'
we
can
fourth round of wage in¬
that would
the
80th
agricultural
electrification
billions of dollars- of house¬
and
new
tools
will
excessive
in
Congress provided
hay
all
baler,
hand
completely' eliminates
operations and .human
handling of hay from
the barn
cutting to
mow.
the
"All of these
developments
fluence
Paul
It
much
institutions.
it
would be able to prevent Britain
too
from devaluing
adequately if and
devaluation should be
necessary.
experience
that
not
is
it
that it is
objection
powerful
too
is
but
has
firmation
been
the
of
that
the
far
so
con¬
no
original British
might abuse
Fund
its poyer by vetoing a justified
valuation of the pound—for
de¬
the
that Britain has no
desire to devalud- the pound.
On
the other hand, hopes that the
Fund would be able to prevent
simple
reason
multiple
practices have
currency
have failed to materialize.
France,
Italy and a number of other coun¬
tries
cheerfully disregard their
undertaking given in the Bretton
Woods Agreement to abstain from
such
practices,
and
the
Fund
to
seems
to
unable
be
choke
off
demand.
reserve
part
The
of
do
any¬
thing about it.
It is not known
whether
the
offending member
a
the
increase
requirements
"These
steps constitute the be¬
ginnings of what may be an era of
tighter money. In the past, very
"We
face the difficult task
now
of
steering a middle course in our
policies so as to check inflation
without precipitating contraction.
goal is abundant job oppor-
tunites, high-level output, and
sonable prices.
pro¬
rea¬
Government hav¬
ing control of fiscal and monetary
policies has the greatest responsi¬
bility in steering this course."
vide prodigious outlets for invest¬
are
abnormal
It
dollar
felt
is
statutes
those
would
in
of
of
requirements.
Bank,
institutions
"white
as
the
whole
&
Co.,
of
takes
has
British
the
ing this year,
pleting
a new
today com¬
dwelling unit every
We
are
34 seconds around the clock every
S
"If,
as
extent
in
distribution
and
servicing.
-
---We
are
members of the New York
'•
,
.
to*
a
degree the
beneficiaries of momentum of the
i
turing facilities begins to shrink,
.
Stock
Exchange
stock
still
depression and war-created sho!rtinvestment in manufac¬ -ages and the tripling of our moitey
day in the week.
:
some
supply..,This redundant
money
is
public which
interest in such matters.
an
Nor has
the report that the
and
announces
and
other
cilities to Yugoslavia increased ita
It is pointed out that,
popularity.
since
the
Marshall
ruling
facilities
their
use
Fund
from
commodity exchanges,
{the
association
with
the firm's uptown office of
Roger
F.
P..
McMahon,. formerly, with
Jacquin, Bliss & Stan ley.;-;.''
which
under
countries
aid
not to
are
the
prevents
assisting
Western
Europe, its main sphere of activity
lies in
tries
Eastern
behind
Europe, in coun¬
the
Curtain."
"Iron
This, it is argued, amounts to in¬
financial
direct
Union.
Soviet
came
the
to
Bank
the
as
be¬
Settlements
instrument
an
financial
of
the war, so
destined, it
suggested, to play a similar role
the present international politi¬
before
appeasement
the Fund
it
Just
International
for
in
assistance
seems
to be
cal tension.
The outcome of the
Washington
is
Fund
of
has,
the
course,
of withholding assistance
offending
members.
But
from
since there is in any case a ban on
to countries par¬
dollar facilities
ticipating in Marshall aid no pres¬
sure
can
be brought to bear on
them by that means. Moreover,
since the
be
not
does
Fund
seem
to
helpful in the present
crisis, member countries are less
afraid of being expelled than the
Fund is of losing members.
very
with
awaited
the
some interest, in
something will be
hope that
done to
ensure
that the two insti¬
tutions should play a more active
and
effective
more
the
in
part
present crisis.
Entile Z.
Weinberg Now
With Bruns, Nordeman
Nordeman
Bruns,
Beaver
Street,
New
&
Co.,
60
City,
York
to the second point
against the
Fund—that it" has been unhelpful
memb
amidst
change,
an¬
il o u n c e
that
This
of
brings
us
criticism
Stock
the
present
difficulties.
Last year when the meeting was
held in London it was urged from
British
that
side
rule
the
ers
of
the New York
raised
Ex¬
Emil Z. Wein¬
berg
under
is
s o c
now
i
ted
country is not allowed to
draw more than 25% of its quota
a
within
charge of
their public
which
a
year
one
any
This
suspended.
was
should
be
allowed
their facilities
should be
opposed,
to
in full
draw
the
resources
hausted,
could
Fund
any
ion
be
would
further
that
and
r
then
use.,
the
cease
It
was
a
to be of
joining
facilities^* of
Fund should- be reserved for
r
the
com
de-
partment.
-Mr.
Wein¬
the
securities
business,
that the
his opin¬
in
berg, who has
20;.years' ex¬
perience in
on
Fund's
before equilibrium
restored,
a
them
relations
would soon become ex¬
long
s
with
Emile Z. Weinberg
principal
Fund
facilities to Czecho¬
granted
slovakia and is about to grant fa¬
,
construction record in house build¬
They, and
established at
Bretton Woods, stands utterly dis¬
credited in the eyes of that sec¬
system
dertaking.
■
Hammili
too
looked upon
are
elephants."
.
Shearson,
far
modified in
light of experience. As it is,
both
ground that if member countries
With Shearson, Hammili
the
also
and
are
be
however, by Mr. Snyder, on the
new
that
Fund,
rigid, and should
the
mere
a
London
the
the
be
of the present
ocean
meeting of the Fund and the Bank
power
in higher interest charges
private loans.
re¬
more
once
members in violation of their un¬
comn^ercial banks will slow down
for
that the
so
become
facilities
tion
quite powerless.
There
fears
main
The
ground.
would
drop in the
that
power,
On the basis of
of the last eight
months, however, the Fund is nowcriticized on a totally different
the
credits
contends that the Fund's to¬
ment
feared that the Fund would
was
have
of
resources
frozen
Against this the American argu¬
Einzig
tal
the two
over
The
Our
Revolutionary Developments
Dr.
t
n
e
the
available for meeting minor gaps.
through its direct and indirect in¬
of
efficient than the
more
m
temporary im¬
conditions,
sources
of
farm-operating appli¬ few booms have come to an end
tools, and implements. The except through a
growing scarcity
hay maker, for example, con¬ of money.
siderably
normal
governments have been threatened
anti-inflation
steps with expulsion; if so, the threat
which
are
beginning to make produced singularly little impres¬
themselves felt.
sion.
The payment of premiums
"The new consumer credit con- on gold is also practiced by some
number
in
Farm
n
found
of
and
ders
r
when such
flected
veri¬
abundant opportuni¬ ment, emphasizing the importance
investment in public of diverting a substantial portion
utilities,
service
establishments of the national income to saving
so as to finance this capital forma¬
including many varieties of com¬
mercial activities, hotel accommo¬ tion. • Similar revolutionary devel¬
opments are taking place in many
dations, etc.
'• '•>
processes
and to
"We may, surpass the previous manufacturing
"There
that
year
Some experts be¬
ances,
years
the next year or so.
ties for
two longer.
a
been
capital investment.
new
have
technology.
and
signs of declining in
last
our
industries
new
products
forward at an unprecedented
rate
lower.
In the
production cycle
relatively
of new loan and credit expansion.
The
developed. Federal Government's upward ad¬
Regional relocation of people and justment of the interest rate on
industry all require great quan¬ short-term borrowings is being re¬
sprung
means
are
business concerns as a
tinue
"Whole
be
conviction that peo¬
being hoarded.
"While profits
delay "lower prices for
creases
clouded
"Business
of beef, the
simply pay out
gainfully occupied person is still
more
purchasing power, which
below our pre-depression ratio.
would tend to raise prices or at
Since the beginning of the depres¬
least prevent them from settling
sion we have added the equivalent
down.
of two Canadas in population.
"Many
of our shortages and
Tighter Money
some
of our high prices are due
"Due to the unrest created by
to bottlenecks in production facil¬
rising prices, the special session
pessimism
defined as the
be
sumer
investment
capital
of
Fund,
countries
weak
a
the
by
e
are
would unfreeze with the return of
States Gov-
being the production of pork.
the
the
economic
be dictated
of
result in
mobilization
that British
time
in¬ lines arewiii- for some trouble or
previ¬ readjustmenUand this ought to be
taper off.
or
must
sow
new
as
should
fears
to
due
that the
by the Fund
not in several years'
if a full use of the
Even
facilities
was
—
the United
housing
opportunities
vestment
Fund
owned
now,
time.
Monetary
purposes,
"Some
funds
ti onai
a
thereby actually shrinking for the
In the
[-'should be made to exploit
out¬
for ceil¬
ing
■
can be di¬
orders were up 16%
and service
establishments, prosperity is cer-r tories were up only 7%.
tain to continue and every effort
"Clearly, some of the soft goods
into
verted
mediate
ity production
and
employ¬
tern
needed
policies would
spots
investment
the
The British argument is
resources
increase in our
tion by six, one young
be
kept for breeding
decline in optimism
immedi- ^
paratively normal periods when
they could play a very useful part
in balancing temporary deficits.
Their
that of the In-
the
For
hog popula¬
every
lieve
pessimism regarding long-term business, despite
the
in
original unpopula rity
—especia 11y
are
prices have hit their peaks.
its Economic Research Depart¬
<♦>-
un-
monetary" and
the United States at its September meeting, Dr. ple,
P. Schmidt, the Director of
Emerson
y
highly favorable to
breeding of more hog stock.
is
day
or
Directors of the Cham¬
abstract of a report to the Board of
an
h 1
g
Britain.
the pros¬
may
United States, reports while immediate outlook
o u
popular
lower prices are still
The hog-corn ratio to¬
for
pects
of
'
LONDON, ENG.—The annual meeting of the International Mone¬
tary Fund and the International Bank of Reconstruction gave occasion
to a revival of British press criticisms of the two Bretton Woods in¬
stitutions.
Ever since they were conceived in 1944 they were thor-
textile
some
case
Spots in Business Picture
capacity production is good there is some
for long-term future.
for
would be too powerful to complaint they are not powerful enough.
Says statutes of institutions are loo rigid and Marshall Plan limits
cash
mines
.:^;
'In
International Mone¬
on
tary Fund and World Bank has changed from fear these institutions
short work-week.
a
mills.
the
than
amounts
market.
be¬
present economic situa¬
tion and the fate of British indus¬
our
of unfavorable views
sphere of their activity.
"In spite of these bullish fac¬
monetary tors, more soft spots are beginning
to appear.
Price declining grains
policies, Mr. Pew declared that
have reached or approached the
"industry will commit economic
arlificial
government
supported
suicide unless it can create with¬
The futures market
in its operations the means to in¬ price levels.
in most grains is lower by sub¬
sure its reproduction."
tween
By PAUL EINZIG
Dr. Einzig notes basis
unsound
from
sulting
Bretton Woods
on
Institutions
Some Soft Spots
Schmidt, Economic Research Director of Chamber
of Commerce of the
Britain's Views
automobiles, and some metals, the
'gray' market continues to persist.
In the case of lead and aluminum,
in
many
markets the price of
scrap metal actually exceeds the
price of brand new ingots.
will
Sees Some Soft
up
which
in
19
our
\
industries
those
continuing ability to serve Amer¬
ica's needs is threatened by the
disastrous effects of inflation, re¬
industrial
11
industrial
;y;.
.
(1551)
prices have been kept artificially
low, such as farm implements,
178% in replacement value of present facilities.
Howard
J.
-
into
way
structure,- pulling
demand.
Philadelphia Financial Analysts, J. Howard Pew cites rise
In talk to
its
working
cost-price
"In
CHRONICLE
FINANCIAL
&
was
public relations counsel prior to
Bruns,
,
Weinberg also
to-1945
the
*
as
War
a
Nordeman. : Mr.
served
from
1941
district manager for
Production Board;
w
' V »'.
yG
,
} / V-
20
(1552)
THE
COMMERCIAL
The
&
FINANCIAL
death
of
Elwyn
CHRONICLE
St.
of
heart
a
attend
Bankers
and
Guaranty
at
a
Trust
Vice-President
Doty
as
Company
the
as
John
R.
of
and
of
appoint¬
Gentes
H.
Assistant
an
Secretary,
both in the
the
foreign department of
company's main office.
Mr.
Gentes has
been
officer in the
an
of
cate
reduction
Detroit.
the
of
value
1944,
and
Second
for the
last four years as
Vice-President.
In the Guaranty
other
New
York
was
of
of the par
value
par
of
$66%
the
made by
istrative Committee of the Foreign
Credit Interchange Bureau of the
"Herald"
Association
of
Credit
other
foreign trade organizations.
Mr.
Doty has been with the company's
foreign department since April,
1946,
and
and
had
business
previous
banking
experience in
New
Ynrk and Cuba.
Sloan
that
RR.
of
Mr.
railroad
the
In
Oct.
5
it
Hankers
Trust
President
Company
of
of
New
York, has announced the election
of two officers and the
promotion
•of three others.
sistant
Those named As¬
Vice-Presidents
Burrowes,
ficer;
F.
formerly
A.
Assistant
trust
a
Ritchie,
F.D.
elected
of¬
previously
to
Flaherty
the
post
has
been
Audi¬
an
has
of
been
Assistant
Treasurer, and D. Mac
erson
G.
Comptroller, and C. F.
Jennings, who had been
tor.
H.
are
M.
named
Dick-
who
man
the
Groton
served
Boston
S.
Kleeman, President of the
financier.
temore.
executive
bank
will
officer
of
William
be
Colonial
privilege for
a
Trust
First
the
Oct.
states
The
that
ciated
for
4.
Mr.
with
64
was
The
Authority
preeminence
of
the
Port
the
to
New
York-
was
District."
Included in the display are pic¬
of
each
of
the
bi-state
agency's bridges, tunnels and air¬
ports, as well as its seaport in
Newark,
union
its
grain
railroad
terminal
freight
and
at
the
W.
97th
vious
of
under
and
construction
Newark,
terminal
to
Authority
block
and
be
in
in
two
1950
elected
was
Peoples
the
entire
and
41st
through
other
literature
issued
to
"
shippers, and data on the
Authority Trade Promotion
fices in New York,
Port
of¬
Chicago, Wash¬
a
i'
s|;
.
.
'i,.
Savings Bank of Brooklyn, N. Y.,
was
announced by D. Irving
Mead, President, according to the
Brooklyn "Eagle" of Sept. 29.
it
tji
$
#
■
*
.
\
the
First
ap¬
page
1329.
of
plans
First
the
of
National
the
board
had
24.
of
$15,000,000 stock
a
which
raise
would
the
to $75,000,000 from
The
other
and
also
staff,
William
named
Presidents
Dec.
added
Bank, Secretary,
E. Roth, Cudahy
State Bank,
Cudahy, Wis., Treasurer.
"The
Vice-President
a
for
as
bank's
Dodge,
new.
.Vice-
was
post
of
James
Company
of
B.
In
tion
C.
partment,
of
trust
was. announced
on
8
by
Frank R.
Denton,
chairman of the bank.
stockholders
National
Bank
approved
on
in
Oct.
of
Latrobe,
1
the
result
has
$75,000,000
and
have
a
become
of
and
Parker
S.
Maddux
Gaevert, Robert A.
William
A.
H.
to
of
the
the
of
old
First
liquida¬
National
which
was
Flei¬
Assistant
Arthur
Hubert
ment,
located
now
at
This
head of his
share
in
The
stockholders
notice
that
the
dis¬
First
amounting to 25% of
preliminary to a final
disbursement expected to amount
to $7,000,000, or 35%, contingent
Pa.,
upon
in
full, many
with
What is
of
the
"With
•
office
sumes
Oct. 10,
on
as¬
dis¬
was
Dr. Varona Galbis, now in New
York
for
discussion of
affairs
of
his
Exchange with financial in¬
terests, said that members of the
New
York
Stock
Exchange
and
representatives of finance and in¬
dustry,
elated at opinions
the President-elect
were
expressed
by
when he attended
recent meet¬
a
ing of the Exchange held in his
honor.
"The
President-elect,"
Varona
Galbis,
said Dr.
"expressed
the
prosperity,
1,
Cuba.
the
for
financing of auto¬
operation since April
The new office is ex¬
1917.
pected to open for business shortly
after the first of the year.
and
Homer
E.
Geis,
"The
this,"
Assistant
Vice-
the
progress
of
'
President-elect
said
Dr.
"emphasizing
amplified
Varona
Galbis,
requirement for
a
fair wages; encouragement of fair
profits that will enable employers
to pay them; and mutual coopera¬
Treasurer of the bank's affiliate, tion in converting manpower and
California Trust Company, have resources into usable, fairly dis¬
President
of Los
California
of The
Bank
Angeles ancl C. J. Fuglaar,
completed 25 years of service with
their
respective institutions.
A
graduate of Georgetown Univer¬
sity, Mr. Geis was admitted to the
tributed wealth.
rona
program" said Dr. Va¬
Galbis, "is to maintain a
California
well
balanced
State
in
Bar
and
1923
tana and the District of Columbia.
Fuglaar
for
in
positions
held
number
a
joining
of
the trust
prior to
company's staff
years
accountant in 1923.
as
"A
major promise in
Dr.
Prio
Socarras'
price for Cuba's
that fair profits will
be earned; competition with other
producers will be kept on an
sugar crop so
equitable basis; and, when supply
again
balances
with
demand,
Cuba's record of not taking price
advantage
during
the
shortage
will be beyond reproach.
as
The election of Henry Matthew
President of the Federal Land
of
k
Wash.,
Spokane,
in
n own
"Times"
of
the
was
Seattle
Associated
Sept. 23.
with the Bank for 20 years,
is
served
17 of
ment made
says
"The
President-elect,"
con¬
Varona
Galbis,
"is
tinued
Dr.
aware
that
capital
is
considerable
idle
in
succeeds
the
who
that
and
Cuban
suitable
opportunities must be opened for
its employment. He also recog¬
nizes
the
need
Vice-Pres¬
as
Matthew
retiring,
investment
of foreign capital
to
expedite
and prosperity;
progress
Cuban
and
the
coordinate need of insurance to in¬
announce
vestors in the form of
an
by William A. Schoen-
feld, Chairman of the Land Bank's
efficient,
dependable government and har¬
monious
Board.4
internal
conditions."
The President-elect is-described
J. W. Woolfolk Dead
J.
W.
Woolfolk,
Wheeler
&
Orleans, and
of' the
New
change, died
a
President
Woolfolk,
a
of
New
intention
on
Stock
Ex¬
Dr.
for
Sept. 22.
to
run
the
government
business-like basis.
a
former President
Orleans
on
Inc.,
democratic, vigorous
young,
minded man, with the ability and
.
Varona
the
Galbis, in speaking
Havana
Stock
Exchange,
said that it is his impression
BEVERLY
Frederick
assessments paid."
443
HILLS,
Vadasz
ated with John B.
North
is
CALIF.—
now
Dunbar
Camden Drive.
inn
■
A
associ¬
&
that
capital and industry look forward
Dunbar Adds Vadasz
payoff, of
25% .to stockholders, their recov¬
ery is expected to reach 85% of
issue
Dr.
continuous
accumulated
previous
indication
an
President-elect
follow, when his Government
with
one
probably
course
Carlos Prio Socarras of Cuba will
labor and management are essen¬
tial
to
national
and
individual
States
interest.
Latrobe
Regime's
mobile purchases and has been in
in¬
„
firm
Policies Indicated
quoted also said in part:
ZurSchmiede's
was
investment
own
New Cuban
as
Mr.
forms
the
he
in Los Angeles.
Mont¬
510
department,
the Presidency R. E. Brown,
Oct. 25
In
Co.
past
his
distinction of firm belief that complete cooper-r¬
having been the first to be estab¬ ation, harmony and understanding
lished by any bank in the United between the Government, capital,
gomery Street.
it is said, has
he
paper
Oct.
&
O'Neil, Jr.
y
Huff
William Lloyd Bloom,
are
Mr.
on
R.
-
M. Hall,
ident,
will
e
and
closed yesterday by Dr. Miguel
George J. Myers Varona Galbis, Vice-President of
the Havana Stock Exchange.
and Raymond S. Stelling."
Cashiers
which
bank
1
Butler
promotions: Pro¬
promoted
made
troit "Free Press" of Oct. 6.
Reference to
our
further
.
Herbert J.
are
Bank
4:
by W. T. ZurSchmiede,
President, according to the De¬
plans for
the
"Chronicle"
/
k
c
u
Brothers,
branch
charge of that
moted to Assistant Vice-Presidents
sur¬
pending tax settlements.
of their bank by % "All depositors have been paid
office of the Mellon.
The
Mission
be in
a
nounced
the taking over
the Mellon National Bank & Trust
Co. of Pittsburgh.
The bank as
a
will
$5,000,000 disbursement by the
First Liquidating Corp., it was an¬
Vice-
the
bank
furtherance
tribution,
claims, is
The
the
a
de¬
-
the
the
Pittsburgh,
the
the
surplus
account
which
$75,000,000.
After the
Bank of Detroit, Mich.,
Smith, formerly Assistant
Vice-Presidents
in
now
placed in receivers' hands in the
1933 bank holiday, stockholders of
reelected
Pa., of Clifford L. Potter and Mil¬
ton
taken from
4<
The appointment as Vice-Presi¬
dents of the Mellon National Bank
Trust
be
$15,000,000
$135,000,000."
Secretary.
was
President
North Dakota and Montana banks
the
plus of $60,000,000, or a total
elevated to the added
Assistant
for
at
capital of
ensuing year.
in addition,
Assistant Secretary and Dodge
Leach
will
distribution
the
Assistant Treasurer.
Fran¬
San Francisco "Chronicle" of
Sept.
30, which adds that Mr. Ehrenpi'ort
has
been
Assistant
Viceand will
&
Bourbeau
Douglass,
the
of
of San
Mr.
was
formerly with
B
elected
i 1
e
Morgan & Co.,
George A. IJhrenpfort has been
Mr.
funds
Stands
P.
Seventh
of
distribution will previously practiced law in Mon¬
15.
the
of
share will
one new
The
be made to stockholders of record
and
Mr. Blake will
serve,
&
owned.
Raymond
members
operating
plan to be submitted
be distributed for each four shares
dividend
Blake
were
"Journal"
in part:
say
West
2 10
(Wis.), •* State
and Miss Laura
the
on
present
now
pre¬
Treasurer
as
The Steuben Trust Company of the
plans was made in
Hornell, N. Y., received on Sept. .of Sept. 9, page 1017.
ef¬
was
cpjumns Sept.A2,
that
to shareholders
that
,v
Paul E. Landon has been elected
trustee of the South Brooklyn
Sept.
special meeting of share¬
a
"Under the
ington and Cleveland.
v
of
30
the
directors
lowing to
President."
on
of
$60,000,000. The Chi¬
"Tribune" of Oct. 9, from
which we quote, also had the fol¬
meeting held
In reporting this, the
Charles C. Marshall
40th
charter
the
Chicago toward the dis¬
dividend
annual
union
bus
West¬
consolidation
bank's capital
the
Manhattan
the
the
distribution
completed by the
between
and
H.
as
Streets
and
Eighth and Ninth
iAvenues in Manhattan. Port
pro¬
motion
is (highlighted
maps
"Two
bank's
as
now
of
holders for Dec. 21 to vote
of age.
of
position
Secretary.
in part:
enlarged
drawings and plans of the
union motor truck terminals
and
of
of
called
At his death
Upham
change; fir m
of
DempseyTegeler & Co.,
Street.
"President
cago
terminal.
The exhibit also contains
of
Ex-,
Stock
Wis.,
O'N
Wauwatosa
announced other
a 25% stock dividend,
Brown, Chairman, an¬
nounced after a meeting on Oct. 8
asso¬
the New York
....
Chairman; Mrs. Mabel P. Schouten,
says:
tribution of
died
J
v*m a
Miss Mary A. Ralston, First Wis¬
consin National was named Vice-
office.
Edward E.
its
Robert
New Jersey Port
tures
"Journal"
with
sociated
, v,
„,s
it
is
an¬
to the
Mil¬
according
waukee
Hu¬
—
O'Neil, Jr. has become as¬
Miss
National
Milwaukee,
Carroll
the
Bank
furtherance
In
institutions
two
years.
years
on
of
nounced
❖
of
916, and Sept. 30,
page
"Herald"
Fisher
the
nearly 50
he
Boston
ANGELES, CALIF.
bert R.
Chairman,
of age.
years
*
title
peared injtjiese
Old
Colony Trust Co. of Boston,
on
until
member
a
Bank, the Farmers and
regarding
Fisher, Vice-President
specialist of both the
National Bank and
52
Sept.
on
directors
this
great contributions
of New York
elected
Marine
Savings Bank, all of
The Carroll County
The Anglo California National
National Bank has common capi¬
Bank of San Francisco plans to
tal stock of $400,000, divided into
open a branch office on Van Ness
40,000 shares of the par value of
Avenue in that city, it was an¬
$10 each, and a surplus of $550,000.
nounced Oct. 7 by Allard A. Cal¬
The First National Bank had a
kins, President. The new office
capital of
$125,000,
while
the
will have complete banking facil¬
Farmers and Mechanics and West¬
ities. A large area will be occu¬
minster Savings Bank each had a
pied by the headquarters of the
capital of $100,000. Previous items
bank's automobile contract depart¬
Willett,
Oct. 5.
Company to pre¬
exhibit," Mr. Kleeman Providence "Journal" stated
said, "which so clearly depicts the Mr. Upham also retains his
sent
has
of
of
as
scher;
Savings Bank of Providence, R. I.,
"It is
Exchange
Bank
Peters
Bank
trust
Demsey-Tegeler So.
Of
Westminster
First Vice-President.
a
Audit
the
lobbies, will remain
four weeks.
Bruhn
Westminster.
Pending such election the
chief
of
Mechanics National Bank and the
Mr. Wit¬
successor to
a
board
Chairman of
as
National
fected
"with regret" and that his group
now
has under consideration the
election of
President.
the
on
was
the
National
that the acceptance of Mr.
Wittemore's resignation was taken
Vice-President
for
Milwaukee
minster, the consolidation
com¬
view
of
Paula
the First National Bank of West¬
suc¬
The pictorial exhibit, which
extends through 17 windows
along
the two streets and in the
on
Company.
1942
became
minster, Md.,
many
He
he
Evans
County
pany.
building
The Association of Bank Women
law in Mil¬
he joined
to
4:
Maine
&
when
Under
veteran
a
elected
was
Mr.
said
Rollin B.
Company of New York at the
Avenue of the Americas and 48th
Street, it is announced by Arthur
in
of the Finance Committee."
Howard
S.
Palmer, re¬
signed. The same paper also stated
that in making the announcement
Albert M. Creighton, Chairman of
the board of the Reserve Bank,
and
in the windows of Colonial Trust
Mo.? at a board of di¬
meeting held Sept. 23.
San Francisco Bank
1947
Assistant
story of The Port of New
York Authority is the theme of a
special display installed on Oct. 9
Adminis¬
Hoover
Trust
in
and
year, and served
the
Committee
RR., was chosen to head the re¬
organized New Haven road Aug.
31, after control of the railroad
was acquired by
a group headed
by Frederic C. Dumaine, 82-year-
Auditor.
The
va¬
directors of du Pont in the latter
stated
H. R. 0'Neil Joins Staff
of
cisco, Cal., it is learned from the
Boston
was
Wittemore,
with
years
old
Colt,
Co.
LOS
years
Wilmington
He
ceeded
S.
Relief
Herbert
five
Trust
&
President
Hartford
Men, and has been active in
de
member
a
as
practicing
for
Mercantile-
In 1935 he became Executive Vice-
the Banking Department on Oct. 1.
banks
Chairman of the Admin¬
^National
di¬
Pont
Russia.
"After
was previously as¬
The resignation of Laurence F.
sociated, he has specialized in Wittemore as President of the
foreign credits and other phases Federal Reserve Bank of Boston
of foreign banking. He has writ¬
was- announced
by the directors
ten extensively on foreign credit
of the Bank on Oct. 4.
Mr. Wit¬
and exchange matters, and
has temore resigns to devote his entire
been a speaker on these subjects
time to his new post, President
before numerous groups. He has
of the New York, New Haven &
as
term
a
under
waukee
with which he
served
du
Special advices from
the New
York
the American
of
$50 each. An¬
was
I.
Austria-Hungary and the Crimea
each, to
$250,000, consisting of 5,000 shares
nouncement of this
E.
was
to
and
tration
value of $50 each, and
shares of common stock of
1,500
the
Bank
of
Louis,
rectors
of
graduate] he spent two
a
cations
of
$50 each,
1,000 shares of preferred stock "B"
par
of the par value of
until
of
Commerce
appointed
was
Cashier
to
"Times" said in part:
"While at Oxford [of which he
capital
stock from $282,000, consisting of
2,640 shares of preferred stock "A"
sistant
in
To¬
Mr.
Wilmington
the
in
the
and
at
way
convention
annual
Nemours Co.
28
the
approval by
the
State
Banking Department for a certifi¬
company's foreign department
since
1924, serving as Assistant
Treasurer until 1929, then as As¬
Manager
his
on
Evans, who
born in Racine, Wis., was a
announces
Alexander
of
result
suffered
while
the
rector
ment
attack
the
as
the American Bankers' Association
CAPITALIZATIONS
New York
'Sept. 27
on
ledo, Ohio,
NEW BRANCHES
Hauss
Assistant
curred
News About Banks
REVISED
E.
of
Wilmington
Trust
Company of Wilmington, Del., oc¬
CONSOLIDATIONS
NEW OFFICERS, ETC.
John
Evans,
President
Thursday, October 14, 1948
Co.
great
confidence, that
opportunities
Cuba
as
the
will
new
be
new
opened
in
government in¬
augurates its policies.
/vl...
Volume' 168
THE
Number 4742
COMMERCIAL
&
FINANCIAL
CHRONICLE
(1553)
them to stockholders at the rate of
$100 for each 15 shares of stock..
-However, they will be convertible j
Graham Adams, financial consultant, in letter to friend, says
life ?
caused by inability of private investors \
supply needed industrial capital.
;
«
companies have filled
to
The
.
The text of this letter follows:
Dear
:
If .you
have not read it, I be¬
will be very much in¬
you
terested
in
the
enclosed
"Empire
Trust Letter, " dated Oct. 1, 1948.
Mr. Lawrence is one of the sound¬
est economists I know.
Wholly aside from the life in¬
compan y-commercial
surance
bank
controversy regarding infla¬
tion,
wh ich
y ou
apparently
launched
(shame on you!), I am
wondering what would have hap¬
pened to our economy if the life
insurance companies did not con¬
structively
vestment
into the
step
created by the
them operates, in a
revolving fund.
In
vacuum
an
senior
industrial
adequate
amount
.-ven
companies'
of
securities
been
formation
in
hands
Who
were
panies
money
tions.
The
little capital
15 years in
very
individual
all
should
we
it
be
have
investors
position to loan
in a
are
this
the past
of
and,
assets
total
me,
any
thankful that the insurance com¬
others during the past ten years.
Because of almost larcenous taxes,
there has
to
seems
to
a
event,
$10 billion would represent
20% of the life insurap.ee
only
banking houses to dis¬
like
way,
very
to qualified corpora¬
insurance companies
exacting requirements
and I know from experience that
the Joans are made on very con¬
servative and constructive bases
formerly the principal
,
clients of the investment banking
houses.
Furthermore, the govern¬ u.d after- the .most thorough in¬
ment has kept bond interest rates
vestigations.
so
artificially low that the yields
■
them, al ter taxes, do not attract
individual investors.
In addition
These
long-term
on
this
to
the
printing,
accounting,
legal and other expenses and the
delays disclosures and uncertain-,
involved
ties
in
registration with
the Securities and
Exchange Com¬
mission (as part of the underwrit¬
ing and distributing procedure of
offered securities) often
publicly
of
competitive in
way
demand
made
companies and especially
small industrial companies. In the
lace of these
a
conditions, there
was
growing demand for long-term
Junds with which to finance post¬
reconversion
war
increased
quired
and
in
capital
re¬
inflation period to
an
carry
higher-priced
inventories,
larger accounts receivable, mount¬
ing payrolls, etc. Fortunately, the
short-term
loans
commercial
banks
against the latter's demand de¬
posits on which they do not pay
interest. On the other hand, the
insurance companies have r«; con
stant influx of
premiums in
of rheir current payments,
liquidity
and, in
policyholders,
return
justice
cost of insurance
to become
life
patriotic contribution to
effort by
investing
their
so
of
ficially
supported,
Oearing
government
to
former
extent,
some
functions
the
of
the
invest¬
ment banking houses, so far as
senior financing is concerned, for
corporations other than railroads,
public utilities and municipalities,
which, under the law, must sell
their securities through the medi¬
um of competitive public bidding.
At the risk of boring you
-
information
have
I
would
following
round,
492
you
like
to
approximate
life
make
insurance
a necessary
service
figures, the
companies in
in
outstanding.
surance
have about doubled
cent
decade
818
over
Their assets
in
every
re¬
and,
as
you know,
(37.2%) of them,
billion
at last June 30, were invested
in
United
States
Government
as
(and,
incidentally, where
would these $18 billion of gov¬
ernment bonds have been placed
if the life, insurance companies did
not
buy them?). I do not believe
more
than 25 of the 492 life insur¬
ance
companies
so
far
or¬
and
There
to
of
arti¬
C.
According to Mr. Sherwin
Badger
of
the
New
England
Mutual Life Insurance Co. (speak¬
ing at the Financial Section Meet¬
ing of the American Life Conven¬
tion,
Chicago,
"During, the
:■
past
proximately $10
Oct. 4,
ten
1948):
years-
billion of
ap-
secu-
issue.
Columbia Gas has offered stock¬
Oct. 5 the right
stock at $10 on a 1for-10 basis, rights expiring Oct.
28.
While the offering is not un¬
holders of record
to
and New Orleans.
The
to
other favorable angles
Ohio pic¬
term traffic pros¬
bright.
appear
The
road
years
industrialization
of the
collateral
serial
of
bonds
trust
maturity re¬
29 have the right to subscribe to
conservative
stock at $21.50 a share on a 1-forNevertheless,
5
oasis, rights expiring Oct. 13.
the preferred has finally been put
First Boston Corp. and Johnston,
on
a
regular quarterly basis and
Lemon & Co. of Washington head
it is likely that a token distribu¬
a
group to underwrite the issue
tion on the common will be au¬
and
take
up
any
unsubscribed
thorized late this year as was done
shares.
Rights
are
currentlyin 1947
outstanding.
These
quirements
dictate
policies.
traded over-the-counter.
regards, I
Revival of
The
of 1948-51, must do a considerable amount of stock financ¬
ing in order to maintain the ratio of equity money to total capitaliza¬
tion at present levels.
Many large companies, such as Cleveland
Electric Illuminating, Boston Edi-4V
son, ; Commonwealth
Edison and greater burden on other methods
others, wish to maintain a high of financing.
Some
companies have issued
equity ratio, but if necessary could
of
brokerage
p a
rtnient.
Sc h
Mr.
was
a
g
formerly
with
First
Calif
o r
nia
Charles
chief
C.
Walter F.
Schag
of the
Statistical
and
ment of Davis,
Research Depart¬
Skaggs & Co. ' -
be
would
stock
new
retired
more
vertible
rather
issue
about
on
unusual
conversion
its
half its
con¬
since a
provision in its
July 1,
privilege on that date
conversion. Pub¬
Service of
cated
sion
of
intention
to
force
issues.
But
the
omis¬
have been selling at a
Detroit Edison proposes to issue
$47
The
feature
A
underwritten.
be
will
be
a
partial
million
instalments
March
1
on
and
or
allowed
being
ments).
about
June
on
1
Dec.
1,
(interest
partial
pay¬
-
..
con¬
which
substantial
version of its Debenture 3s,
t
preferred stock throws a
will
Colorado has indi¬
premium; it will issue new first
ciation and amortization accruals. mortgage bonds and some con¬
vertible preferred stock. - Public
There is another reason why
Service
Electric
&
Gas
hopes
.common stock financing is neces¬
eventually to convert a large pro¬
sary if debt ratios are to be held
do\yn.
Utilities have had great portion of its 6,063,000 shares of
$1.40 convertible preference stock
clifficulty
in
issuing preferred
into conynon stock, but ipust await
stocks in the past year and some
better
markets;, it is imitating
of them, such as Public Service
Philadelphia Electric in this re¬
Electric & Gas, have substituted
spect.
debenture
l-for-4 basis, with
on a
over-subscriptions permitted.
payment plan, subscritions being
"forced" partial
date.
lic
stockholders
payable at option in three equal
stock , to
maintain this ratio—
though of course some equity
money is realized through rein¬
vested • earnings, and some ^con¬
struction money is also obtained
thrqugh cash released by depre¬
companies
to
conversion at some later
of forcing
as
leased in the break-up of
offered
of record Nov. 12 to subscribe for
Consolidated Gas of Balti¬
recently re¬
holding
companies,
have
lower
equity
ratios (many of them around the
25% level fixed as a minimum by
the SEC) and must therefore issue
well
,
Co.
,
Virginia Electric & Power an¬
nounced
on
Oct.
1
that rights
increase their debt convertible debentures as a tem¬ issue
substitute
for
common
ratios. On the other hand, some porary
novel
holding, company subsidiaries, as stock financing, with the intention
,
Stock
share. The deal was un¬
by First Boston Corp.
and Drexel & Company of Phila¬
delphia,
who
sold
the unsub¬
scribed stock.
*
:.
a
temporarily
.
as
e
Utility Stock Financing
public utilities, in connection with their huge construction
program
the San Fran-
Power & Light
24 that stock¬
subscribed for 91.5%
316,863 shares of common
recently offered for sale at
$16.25
Ill
Exchange,
Sept.
derwritten
am,
of
the
stock
con¬
Street,
cisco
Washington Gas Light recentlysubscription rights. Com¬
mon
stockholders of record Sept.
offered
of
Davis, Skaggs
members
much of the
financial
pri¬
FRANCISCO,
CALIF.—
Walter F. Schag has become as¬
& i C o.,
which
is" occurring
in
system's territory.
growth
fine pub¬
SAN
Sutter
new
very
Schag Heads Dept.
Of Davis, Skaggs & So.
with
buy
Pennsylvania
City
Clarke is now
111.,
to
enter
a
supple¬
subscription in addition
to exercising
his regular rights,
the additional stock being sup¬
plied (subject to allotment) out of
the unsubscribed portion of the
announced
W.
sociated
year—permitting any
mentary
but
Oct. 7.1948
d
tions.
stature
operates for the most part in an
expanding territory. Over a period
(Signed) GRAHAM ADAMS
New York
the
applica¬
are
Gulf, Mobile &
The long
pects
war
Sincerely yours,
handling
loan
the
ture.
ditions.
With cordial
this
holders had
these
will
them
stockholder
perform¬
companies under prevailing
ganized departments for properly
corporate
lege,
earlier
interest
bonds,
of
Most
not.
the over-subscription privi¬
which proved so popular
carry
also
making
manager
have
investment
curities.
,
bonds
system,
the road's various outstanding se¬
this country have assets today of
$50 billion and $200 billion of in¬
term
long
a per¬
in
others
vate loans to our better industrial
the
in
low
now
are
lic
with
comments:
they
ing
already
may
general
that
the
large
assets
centage
to
over,
fair
great,
a
a
summer lull, plans for
utility stock issues are getting
under way, and apparently they,
will all be
subscription affairs.
Some
are
being
underwritten,
involved in handling and has involved heavy cash outlays
moving the traffic, which usually j Also, a large amount of seria
account for 50%, or more, of all equipment debt has been contract¬
operating costs, adds considerable ed and the company has an issue
insurance
companies not only made
After
new
penses
protection is not
the
that
the proposal Oct. 26.
on
.
prohibitive. 1 personally
insurance
take
a
after;
years
Stockholders]
.
their
to
must obtain
able
companies
were
into the breach and
between 1946 and 1947 the
their investments if the
on
believe
excess
do not
issue."
of
derwritten, a new type of arrange¬
*
ment has been devised whereby a
high degree of operating ef¬ nationwide
group
of
security
including Alton, which was merged ficiency and the basically favor¬ dealers, managed by First Boston
traffic
around the middle - of last year, able
background
augur Corporation, will be compensated
realized by far the largest cut in well for continuation of a high for obtaining subscriptions and for
transportation ratiq of any major rate of earnings over the visible selling shares of new stock to new
They also point strongly stockholders.
carrier.
The Gulf's ratio dropped future.
United
Corp., , a
from 38.8% in 1946 to 32.7% last to the likelihood of a better-than- large holder of Columbia, has ap¬
year.
The 1947 showing was bet¬ average resistance to any decline plied to the SEC for permission to
tered by only a few roads in the in business that does come over subscribe for its regular allotment
country and compared with a ratio the intermediate or longer terms. of about 192,000 shares, and has
of 40.0%
for the industry as a As for the current year, the re¬ also asked permission to buy an
sults to date indicate a possibility additional 50,000 shares out of anywhole.
In common with the industry as of earnings perhaps as high as unsubscribed stock.
The Colum¬
a whole and most of the individual
$5.00 a share for 1948. This would bia rights
are
currently being
roads, Gulf, Mobile & Ohio ex¬ compare with $2.66 a share last traded around Vs.
perienced an increase in its trans¬ year and a deficit in the adjust¬
Central & South West, another
The common has
portation ratio in the first half of ment year 1946.
holding company, plans a 1-forthe current year.
recently been selling only about 10 issue of
Gulf's increase
rights, probably within
three times prospective 1948 re¬
was
not so wide as the Class
a few weeks, to help finance the
average and has been more than sults.
system's
construction
program.
offset by the sharp improvement
Despite the high level of earn¬ Details have not
yet been an¬
in the first two months of the sec¬ ings and the favorable outlook it
nounced, but officials of the com¬
ond; half. The August ratio went is not likely that the management pany and its subsidiaries recently
below 30%, a very rare accom¬ will adopt any regular dividend
held a meeting with a group of
plishment in these days. This dem¬ policies for the common stock. bankers and analysts to acquaint
The
new
equipment
installed them with the almost fabulous
onstrated
ability to control ex¬
As
effects have been cumulative.
deg.ee of
same
life
step
not
with the
course,
the
supply the
working
any
and
by
require
many
i n s u ranee
company loans are,
well
two
than
later
date
will vote
Gulf, Mobile & Ohio stocks have been trading listlessly at prices
below the year's best levels despite the particularly favorable
trend of operations and earnings.
For the eight months through
August net income after fixed and contingent charges amounted to
$3,909,662. This represented a gair.<£
of some $925,000, or 31%, over the southern sections has brought a
method, representing 30% of all
like period a year ago.
Allowing lealthy diversification to the syscorporate flotations in the period.
em's business and has developed
for
preferred dividend require¬
To this date the figure has been
ments for the period, earnings on important
new
traffic
sources.
nearly 40%, while in industrial,
the
common
stock amounted to There is ample evidence that this
as distinguished from railroad and
$3.23, up more than $1.00 from growth has not as yet run its full
public utility, financing, the perearnings for the eight
months course.' Expanding trade through
entage
is very much higher."
Gulf of Mexico ports is another
through August, 1947.
However, Mr. Badger's $10 bilOne of the most favorable as¬ favorable factor.
Finally, growth
hon figure is probably too high,
pects of the Gulf, Mobile & Ohio of the system through a series of
because practically all these loans
picture is the high degree of oper¬ mergers has materially strength¬
are fully amortized, through min¬
ating efficiency that has been at¬ ened the traffic status, in addition
imum fixed annual payments, by
tained since operations have been to improving the earnings by vir¬
their maturities and many of them
largly dieselized.
The major part tue of an increase in the haul on
are further reduced by additional
of this program was completed a through .traffic.
The lines now
ontingent earnings sinking funds. little over a year ago but the pro¬ extend all the way from Chicago
Hence, the total now invested in
to the Gulf of Mexico at Mobile
gram is still continuing and the
inability of the in¬
tribute
the
the
"Chronicle"
Graham
rities.
lieve
"not
gap
has received a copy of a letter, dated Oct. 7,
Adams, .\a financial consultant and a former Wall
Street broker, wrote to one of his old acquaintances, whose identity
is not disclosed, regarding the current controversy between insurance
companies and banks in the mat-"*
ter of private placement of secu¬ rities have been placed by this
which
Fall, offering
tures some, time this
Defends Life Insurance Bond Purchases
21
Convertible
Deben¬
Francis I. du Pont Has
Hew Cleveland Branch
OHIO. — The
Exchange firm
Francis I. du Pont & Co. has
CLEVELAND,
New
of
York
opened
a
Stock
branch
office
at
1010
Associated with
the new office are Carl E. Dyas,
Ernest G. B. Benn and Harvey L.
Euclid
Spero.
Avenue.
All were previously with
office of Hirsch &
the Cleveland
Co.
of which Mr. Dyas was
dent manager.
resi¬
22
(1554)
THE
COMMERCIAL
&
FINANCIAL
CHRONICLE
Federal Reserve
^ank where it
keeps the bank account that that
(Continued from
'
v
1946
either
7)
/
March
of
page
since
progress
in
getting control of
by which our money
the processes
is
inflated, or in creating the
public agency which should study
die picture and provide the foun¬
dation for our future organization
It is
man.
the
figures,
will recognize what I
you
say,
and
if you haven't read, I suggest you
do read the public records of the
talk
ahout
tee
hearings which considered in¬
was
earnest
an
effort
made in both of those Committees
by the members of the Senate and
House to get an accurate pic¬
me
ture of this
exceedingly difficult
problem.
The
questions were intelligent.
lacked1 the * comprehensive
They
accurate
and
detail
which
only
full knowledge could provide, but
the information that was given to
them
not
was
comprehensive,
was
not accurate, was not clear. There
was no life insurance man before
those Committees. There
One
banker,, and he
of
dent
was
was only
the Presi¬
American
the
Bankers
Association, and he appeared by
short,
very
a
and not very helpful
memorandum,
which is incorpo¬
rated
Appendix
the
in
of
the
bearings.
who
members
did
the
of
appear
were
Reserve
and Presidents of
Board
Federal
Federal
Reserve Banks in various parts of
the
.country, and I
that the
contribution made by those gen¬
tlemen
the
to
say
members
of
Con¬
who have the final responsi¬
bility was not what the business
gress
world should provide for the use
of their representatives in a mat¬
ter
of
such
great importance,
where we expect them to iise' in¬
telligent judgment in making their
decisions.
I listened
few days ago to the
Minister of Finance of Belgium. I
a
impressed by three things.
He emphasized the fact that Bel-,
gium has made great recovery
was
since the
been
war.
due
to
that there
He said that it had
private
enterprise,
had been nothing like
or nationalization in
socialization
the
field
thf&t
of
economics.
He
said
in
foreign trade, they
had recovered beyond their for¬
eign trade of before the war, and
even
that the Government had not had
any part
in it, proving that it is
not necessary, even in the field of
foreign trade, to have the govern¬
sound monetary
a
and
lot
a
lot
a
or
What
system,
than
more
more
we
than the
citizen understands about
average
money.
Our
supply
money
understand,
is
to
easy
to carry in your
just short of 170 bil¬
easy
It is
dollars.
consists
It
-
of
two
billions of
coins, mostly silver and
26 billions of bank notes, convert¬
ible into other bank notes, and
nothing else, and the balance of
140 billions in bank deposits.
Before the
60 billion was
enough money supply for our ac¬
war,
volume of Federal bonds.
been
accomplished, the Fed¬
"They
eral
bank
price of gold to the balance of the
were
made ineligible for
ownership until they were
witbin ten ytars of maturity."
■
•
That, of course, was intended to
stop the expansion of bank de¬
posits through the acquisition of
Government bonds, but the Treas¬
ury
went on selling short-term
Governments to the banks, even
after they were prohibited from
buying the longer term bonds, and
the
short-term
cates
had
creasing
heads.
the
deposits
supply
bonds
sold
had.
to
that
the
-And
certifi¬
and
effect
same
bank
money
have
bills
of
and
long-term
banks
the
would
banks
went
buying on the market, even the
bonds
they
were
forbidden to
on
subscribe
to
issue. '
upon
How do I know that?
gold, and the gold has cost
Treasury nothing, V and it is
precisely as if you bought a Gen¬
eral Electric
asked them to restore the
$300 to
balance.
your
But
not
merely that, there has
been added to the bank
deposits of
the country the
price of the
gold
in favor of the seller.
let
the
end
us say,
draws
on
pays
the
and
ance
without action by
That is one mat¬
ter which we, in a business
absolutely dependent
are
ernment
for.
provide
Government
with
us
world,
on
a
sound
gov¬
must
money
for equitable and fair distribution
of
and
goods
services
currently,
for the storing away of
any
and
excess
for future
Government
alone
use.
and
government
give us the sound money
ppon which all business, and all
can
individual
economic
activity
are
of
to
subscribe
to
the
end
enjoyed
matter
of
I
1945.
have
always
in this
poetic license
a
coun¬
of
figures, except in the
life insurance business, where I
under the control of the actu¬
am
aries.
I take unto myself a little
leeway and
in round fig¬
might be expressed
more accurately and more meticu¬
lously.
the inflation
been
by
there would have
as
their
subscribing
them at par.
The
that the bankers
riders
express
what
by their buying them
the market
on
for
only result was
paid the free
And why
did they do it? You
know
supply, but what did the
money
banks have?
added
reserves
convert into
in cir¬
money
culation, consisting of that silver
and those bank
notes, has not
ma¬
terially changed.
It's been around
$28 billion. But that part of our
money supply which is bank de¬
posits has risen by something just
short
of .$20 billion.
the
bond market
System
serve
support
of
the
by the Federal Re¬
under a formula
that assured them that they could
turn those bonds in to the Fed¬
eral when and if
they needed to
if.
do
/
,
of
-But
what has continued to in¬
Oh, if you take the very latest crease the money supply since the
figures, it might be only $16 Vz end of the war? I have just said
to you, since the end of 1945, the
or $18 billion.
The other day, in Detroit, where government debt has gone down
I was dealing with an academic about $28 billions. The market¬
able debt, that is, what the banks
audience
you know, the Eco¬
nomic Club—I recited these fig¬ can hold, has gone down nearly
$40 billion, but, at the same time,
ures and got kind of mixed up at
the money supply has gone up
one
moment
and
used
billions
when I meant millions, and by way nearly $20 billion.
—
of
apology. I suggested that when I
earned my
days,
vocabulary in my early
very seldom made use
we
of the word "billion." It
occasionally that
was
only
referred
we
to
"million." And when I added, as I
add
now
to you, the figures of our
money supply, the figures,
par¬
ticularly of our government debt,
Well, those of
who are fa¬
miliar with the operation of the
banking system know how that
about.
comes
you
We have been
con¬
tinuing to buy gold through the
banking system. We have bought
nearly $4 billion worth of gold
since the end of the war through
the banking system.
we
what
we
have too little of in this
country.
There
are
some
important
con¬
tributions made in those hearings.
Mr. Eccles, with whose ideas we
frequently differ, remarked in re¬
ply to persistent questioning that,
under present conditions, present
organizational
procedures,
the
Federal- Reserve
System in this
country is the greatest inflation
engine that could be contrived by
can
price
posits.
of
the
chief
tinued
of
sources
the
con¬
increase in bank
deposits,
the most important part of our
current money supply.
.
And
that
the
other
way in which
supply continues to
through bank loans
newly created bank
money
increase
made
is
with
deposits.
At
the
Our
supply, to
surprise, I found described by
money
of
taking a little
perhaps I ought
to, I'd like to recite for you the
details of a particular transaction.
A great oil company seeks to bor¬
from
row
than
combination of banks
a
$100 million. The proceeds are to
be applied
to a very desirable
project. The loan is for eight or
ten years. Oh, yes, the banks now
make loans like that, not as many
now as
they did
a
couple of
years
ago.
It was a good credit. The
life insurance companies would
have been glad to have it for that
or a
And
little longer, not at that
a
when
little higher rate.
someone
the sale of
»
surance
business
must
do
when
buy bonds.
gold.
It
is
Knox
and
forwarded
to
Fort
we
in
the
of
financing the
war, and they didn't do it all by
subscribing to new issues.
process
You remember in the Third Vic¬
tory Loan, banks
were
forbidden
to subscribe to any but the shorter
term paper offers.
You remember
that
a
little
later, banks
put
position where they could not
buy and hold subsequently issued
in
were
a
long
term
bonds
number of years;
ing.
until
the
for
a
certain
generally speak¬
time
had
arrived
when they were within ten years
their
it
to
the
earth
which it drew to pay for that gold
that
it
buried.
now
has
"Please
the
gold
restore
safely
the
bal¬
of the Treasury," and in order
accomplish that, the Treasury
issues a gold certificate—oh no it
ance
to
doesn't.
That's what is used to do
in the horse and buggy days.
it
a
does
is
to
enter
statement that
on
some
its
time,
now.
.,
-
"Oh, they can't.
Reserve Board has
What
books
some¬
serve
ernments
"And
at
the pegged
Gov¬
price."
how
"Oh, about $22 million."
Now, that's the way it has been
operating. The banks could go on
making loans, even though their
entitled
borrower a
the
our
you
reserves,
certificate, in
un¬
many Governments
have to turn in to the
Federal in order to make a $100
loan?" (This was before the in¬
crease in reserves.)
will
portfolio had used
gold
rule support¬
must take
Banks
the Federal Reserve Bank will be
.a
a
der which the district Federal Re¬
how, if and. when, in the future,
to
The Federal
ing the Federal bond market
^1
came:
amount;of the gold,-and dhe
^maturity,j J •• • '
hazard
.phrase; Treasury - having Xnotified ;rttte
,
I
returned
bility,'
kind
some
duty to
some
of
the
of
see
responsi-
;
to it that
transaction,
$100 million to the
adding
supply
money
country—isn't that incon¬
with the general welfare
sistent
of the
country?
Isn't
it fair to
whether
the question
ask
ought not, all
to have
of
in mind the
inflation,
higher
lower
by
up
simply
giving the
bank account for the
required
-reserve
life
for
values
life
of
though
even
costs
the
to
I
em¬
insurance,
beneficiaries
insurance, I
speak
in
any
criticism of any particular group,
except the governmental
group. I speak for the public wel¬
fare of all the people in this coun¬
try, and the public welfare is in¬
volved in these banking transac¬
tions which result, as that single;
one did,
in increasing the money
do not
for them alone. I did
supply
through
bank
the
accounts,
posits,
new
Now,
not speak
new
creation of
bank
de¬
money.
if
that
one*
just
Were
transaction
occurring
in
New
York, or Chicago, it wouldn't be
of great, importance. But it has
been
usual
a
transaction, and in
addition to that, the banks all over
the country have
been making
real estate loans which they ought
not to
make with newly
deposits.
The
banks
created
have
been
making farm loans for long-terms
which they ought not to make,
and which, I submit, they would
not make if they were not depend¬
ing oh the continuance of Federal
Reserve support of the bond mar¬
ket and other unsound fiscal and
policies
been enforced and
which
are
have
enforced in
this country.
Now,
I
bankers
think
don't
and
that
life
we
we
insurance
ought to go on depending on
unsound public policies to pull us
men
through
the
problems
of
the
future.
I
am
banker. I aim
a
one
of the
biggest depositors in banks all
through the country, and it is
other people's money. That is why
I am worrying about it a bit, be¬
cause I like to say to my life in¬
surance organization: I have
given
my life to this business, taking
care of other people'6 money, and
I am just fool enough to get satis¬
faction out of the business feeling
I have done a good j ob for those
who have trusted
It wouldn't be
the
good job if, in
principal turns out
the
end,
to be all
me.
a
right, but the purchasing
nothing.
%
value shrinks to
What is the difference between
the
principal of your investment
going down to 70, 60 and 50, and
the purchasing value of that in
which it is payable going down to
60, 50, and 40? This process of
getting
reserves
from the Federal
Reserve Banks and
using them to
make the kind of loan I have been
describing is another contributing
factor
the
in
increase
supply which has
during the last
years.
money
Now,
and I
the
you can
can
listen: I
in
the
gone
can
on
listen,
read. Representatives of
Federal
Reserve
Board
and
financial writers of enviable repu¬
tation say there has been no ex¬
in
pansion
There
has
reserve
reserve
been
bank
Well, if
no
bank
credit.
expansion
in
credit.
take the figures of
and apply themtheir free against the figures of today, there
2V2
is
years
no
been
credit
you
ago
increase. But if there hadn't
an
in
expansion
the
of
reserve
'/intervening
time,'
that reduction-.of-$40 billion in
at the Fed¬ marketable r; government v bonds;
amount of the loan and covering
the
we
monetary
risk
time
more
asks, have
you free reserves to make a loan
foreign gold, which has as large as this—we thought your
my
provided dollar balances in this reserves had pretty closely been
an
academic economist since I
country, and has enabled the sell¬ kept to the legal requirement for
came from Detroit in terms of a
the last couple of years.
ers to buy our goods in an amount
quarter of a trillion, instead cf equal to the sale prices of the gold.
"Oh, we can easily get the ad¬
250 billion, and I say to you, watch
But do you know that, elimi¬ ditional reserves."
out when they start to talk about
nating a few details which are
"How?"
trillions.
bookkeeping beyond my capacity
"Simply by selling some of the
We know how this money
sup¬ to follow, that gold passes through
Governments to the Federal."
ply went up during the war. It was Reserve banks to the Treasury,
"But suppose the Federal re¬
by too much government debt get¬ and is paid for at $35 an ounce
ting into the banks, and the banks by a Treasury check on its bal¬ fuses to take your Governments
didn't pay. for it with present ex¬ ance with the Federal Reserve in order to enable you to make a
1
;
isting money, as we in the life in¬ Bank, and then God help the poor loan like this?"
trillions.
And then the Treasury notifies
the
Federal
Reserve
Bank
on
business people in
That is precisely what
need here, and it is
precisely
they
four times the
gold of additional bank de¬
tinuance
the
from whence
and
all
end of the war,
money supply to pay for the Gov¬
ernment bonds that they absorbed
bankers
to
the excessive money supply we
presently have, go on increasing
our money
supply because some¬
body chooses to sell us gold? That
is what is going on, and that is one
restoration
Belgium.
addition
which
those bonds at
dependent.
Belgium had come about with the
cooperation
and
help
of
the
In
that, the commercial banks have
In giving you these figures, I
emphasize the fact that since the
a premium because
depending on the con¬
i;
phasize the fact that it results in
The bank deposits
scattered through the
perfectly , wel that I am not
smart enough to correct the judg¬
ment of the bankers. They bought
were
have; not
bankers
bank deposits.
Now, I recognize everything up
to that
moment, but why, in the
name of
heaven, should we, with
they
"
question whether,
assuming that that was a good
credit, assuming that it was a good
loan, assuming that it was all right
from
every
point of view, the
of us,
general wel¬
fare in this important matter, be¬
cause when I speak on this matter
of the
premium.
a
'
fair
a
Co., Chrysler or Gen¬
eral Motors, and other
companies,
for equipment and
ships it abroad.
issue.
upon
step for
that transaction.
on
Isn't it
International
them?
The banks created
bank deposits which increased the
But the Minister of
Finance of Belgium said that that
: of
sound
money
in
seller,
Harvester
term
money
This
in
were
that bank bal¬
Well, the
The
transaction is closed.
The
billion, at least, at
1945 of bonds they price of the gold has added to our
forbidden
were
I have had to watch my
the last couple of minutes, because
I see one or two folks here who
that
rate, but at
bilize
•
-
banks held $10
have reached points where some
Do you know how we buy that
represent private business
I am not quarreling with
industry. And he emphasized day soon you are going to be gold?
the fact that Belgium's money had listening to folks who talk about the fact that we buy it. I recog¬
not
millions, not billions,
been stabilized.
but nize that very much of it has been
the government.
refrigerator for $300,
told the bank you had it after
you
had drawn the
check, and then
which was 22% then—it's
now—with a deposit of that
eral,
the
the
and
How do I know that? Well, the
restores
for the
ment
'
Bank
Treasury, and, in effect, • cancels
the check which was used to
pay
in¬
the
Reserve
have been
Where did they get
country.
The gold
is buried in
They got them on the mar¬
Fort Knox.
The proceeds of the
try.
At the end of the war, our ket; and I am sorry for the poor
sale of the gold have been
shipped
I am not crusading against
money supply was approximately banks.
abroad.
150 billion dollars.
I say "at the the banks,
Why, those poor bank¬
We have $100
end of the war"; if there be any ers paid a premium to get those
billion, if that
meticulous critics around, I mean bonds on the market, and there was the price of the gold, added
the Federal Reserve bulletins at was just as much contribution to to
our
bank deposits and our
tivities of all kinds in this
ures
Those
currency,
money.
includes
currency,
lion
There
sound
sound
which
recent Senate and House Commit¬
flation during the Special Sesion.
There is much less
mystery
about
this
matter of
money than we generally assume.
The day is passed when we can
need is
We, the businessmen, have not
our part.
If you have read,
done
turn to
some justi¬
you
is
there
fication for it.
even
and procedures.
pretty strong state¬
a
ment, and yet when
26 %
has
Remove Pegs on Government Bonds!
more
Thursday, October 14, 4948
(1555)
.Would have been accompanied by
a decrease in the money supply
'
during a period that we have enjoyed, if that is the right word, an
increase of $20 billion.. :
We have washed out the effect
of
reduction
government
debt
of
its
by the creation of bank de¬
We
have
have
the
a right to
sell, but we
right to a guarantee from
no
Federal
continue to
tinuance, especially
continuance,
means
continued
the life insurance
from—
I
am
sound
»
that
serve
and
our
have
and through new loans, new pur¬
chases of assets under this un¬
policy of the Federal ReBoard continuing to take
when
that
the
public
increase
1 don't
came
of
for
companies,
ex¬
cept for that portion for which I
responsible, but I
do
such
It is quite true that whether the
from the life insurance
from
or
gets increased
reserves
increase
to
company,
differ¬
each instance, the bank
In
ence.
bank, makes
a
no
with which
deposits
and
*
the
Now,, just think of it. They say
that during the last two weeks of
September, the Federal Reserve
bought $2 billion of government
bonds of a type that the banks
are
not permitted to hold. That
proves they were sold by the life
insurance companies. Well, I can
speak emphatically, because no
company that I have any respon¬
sibility for contributed to any
such sale. Well, let us assume it
The
true.
under any
us
circumstances.
That
costs
.
policy
our
holders
in the long run through the
more
depreciation
of
confer
the
that
benefit
any
it
than
possibly
these
all
of -doom—look
upon
prophets
would
dollar
can
and
us,
if the
happen
what
support
of
life
insurance
com¬
taken away?
What would the life
insurance securities drop "to?
Well,
know,
you
all
are
carried
securities
our
is
what
on
tech¬
nically known as an amortized
basis, and they will continue to
be carried at or about par quite
irrespective of the price that they
enjoy on the market. That is what
kept us stable through the years
of
depression,
cerned about
so
we
not con¬
are
drop in the market
values of the government bonds,
a
pany sold $2 billion worth of gov¬
ernments and the banks bought
and
them. The life insurance company
has $2 billion. What could they do
is necessary to preserve the banks
from any similar detriment due to
with
it?
a
some
other security. What did the
Buy $2 billion worth of
banks get out of that transaction?
We deposited our money in pay¬
ment
for
about it?"
those
bonds,
the
and
banks
got deposits for $2 billion.
Now, the first thing that means
is that with those $2 billion of de¬
posits, they got additional reserves
which enable them to expand that
amount by four or five times. But
just think of it. At the same time,,
the
FDIC,
with that
drop
examiners,
and
readily do what little
in
the
prices
of
govern¬
ment bonds.
And would there be such
a
drop
these fellows with red herrings
as
suggest? Would government bonds
to
go
75
70?
to
wouldn't.
The
Of
they
course
support
\•;*v/''
foolish
supply
money
addition
as a
to
Our
result of it. \
By JOHN T. CHIPPENDALE, JR.
program
does not extend to E bonds and F
and G bonds. The holder of those
sales of life in-,
companies or banks, with
the
result
our
money
of
further increases in
another increase in
market
monetary
cedures in
systemand
one
order.
resentative
governments must
sound
fiscal
it
on
that
coming from.
what
have
The
been
was
over
this morning. We have
invented, set up, and have in full
operation,
the greatest printing
press
that has
ever
been
de¬
veloped in human civilization. I
say
"greatest" because it is as
put
pouring
the
if
hundred,
he
the required
Now,
that
foolish, useless.
was
I wouldn't say it was criminal, but
Wholly
the
against
wel¬
public
fare. Required reserves should be
used for the protection of the de¬
positors, and after the depositors
protected, the balance of bank
are
deposits
should
for
portfolio investment.
There is
the
no
required
reserves
insofar
in increasing
sense
on
this matter
as
deposits
effect
jno
that it would reduce the vol¬
say
that the banks had for future
ume
loans and investments, because the
banks would have to turn in, as it
happened, $2 billion additional re¬
required under the increased
percentages of their deposits.
the
banks
didn't
have
to
turn
anything in. Don't you see
happened? The life insur¬
ance
sales
provided the banks
With all the deposits they needed
What
to
increased
the
meet
outstanding government
debt.
there
then
And
$35 billion
are
of that debt in the Social
and
other
$20
billion
Federal
trust
of
that
Reserve
Security
There
funds.
are
in the
Banks.
They
debt
Then
there
billion
$45
are
of
support.
The money is good. That's about
$135 billion of the whole 250. We
They
years.
in
the
insurance
billion
of
need
don't
the
world
have
remainder.
$20
They
don't need support.
in the hands of
Whether
But
sales.
insurance
sold
by life insurance
companies, or by the banks, the
effect is to increase the money
supply, and it is only because the
Federal
Support
Reserve
in
persists
its
government bond
of the
market.
Now,
surance
<of
the
and
The balance of $60
term
the
respect
sales, let
life
me
to
say
insurance
say
don't need sup¬
we
port. We don't need support un¬
less
want to take the
we
pon
just this
mit,
companies
is not
representation
that
ment bonds
salable. That is
quoted. That they
marketable.
Therefore,
we
That is quoted.
have
a
right to sell
the life
any
neither
should,
the
to
anything like agreement not
sell
nies.
to
any
We
assets of our compa¬
can't
agree
not to sell.
a
companies,
in this
government bonds at
certain
already excessive
us
the banks
day of
right to hand in their
with
requires
in¬
supply, be guar¬
New
law
cou¬
other holder of govern¬
execssive money
anteed
is
That
insurance
them, and in addition to that, the
York
higher
a
support.
dulgence, and
nor
were
proceeds
a
fixed price
increase
money
in
that
supply.
Now, I have talked entirely too
long
to you,
that if I
and yet
I
am
sure
don't say another word,
I
But,
on
the other hand*: we have- every -mother'^ son of you going
right to
a
guaranteed-buyer.^out
the
door- will
say,
the
on
defensive, the
.
.
expressed
was
However, with the
...
pressure
was
/
•
entirely
a
wee
by
the
managers?
money
.
bit of this operation is of the
;
,
.
self-
...
told you
feeling confident enough
here they
so,
.
.
are
the skids."
on
.
now
to say, "See*;.*
Vindication of
.
.
.
close at hand and it is only
There seems to be nothing
so
or
boat.
.
...
adamant
as
sold-out bull
a
who has missed
one
the
.
.
SOME PERTINENT QUESTIONS
Would the dropping of
nation solve all
our
"pegged" prices
problems,
ernment bond prices and
as
to have much of the
entering
there be
Would lower
country
which, to
the anxious seat?
on
as
the least,
say
.
If
,
.
tate the economy into a full blown
depression?
seems
should be
we
believe, should
many
drop in prices of Treasury obligations which
a
gov¬
higher interest costs be the way to prepare
period of business readjustment,
a
a
their complete elimi¬
or
contend?
some
for the involved international situation
mighf precipi¬
If there should
...
military expenditures in order to keep the nation
falling government bond market going to be the
answer
to the inflation problem, or will there be regulation of those segments
of the money markets that have been
fourth, and so on,
led to the brink of
to the inflationary trend?
The biggest dan¬
the country has in front of it
■
.
adding at least
a
little somehing
-
.
.
BANK FAVORITES
'•
V
\
v
,r"
•'
-;V"
'
■'
»
•••
..
' 'V'
'l '
»
.
r'''
\
,■
/
The longer-term eligible taxables, namely, the 2V2S due 1956/58,
cial structure, bringing as
the
21/4.s due 1956/59 and the 2V2S due 9/15/67/72,
it most
certainly will, a complete and ab¬
solute regimentation and domina¬
liquidation from time to time
tion of every interest of every in¬
dividual in this country by the
Federal
intended.
is the
-It
That
Government.
brought
us
many
.
.
changes
of these obligations and indications
walls,
it
and
may
of
in for
rates, but
a
favor¬
are
that
any
further ad¬
have to be made in portfolios will not involve
for holding these bonds
has
.
.
.
Income is the paramount reason
but lessened fear
if
calamity,
must
.
;
.
as
difficult
as
?•
;
"pegged"
that of the
ineligible bonds, because of the smaller amounts outstanding.
that
we
.
It is being pointed out that the problem of holding
want
from
country
we
support prices ranks
over
high in the continued retention of these bonds.
to the position we are
this
be
may
money
looking at these bonds with
are
prices of the three issues is not nearly
save
in
occur
The largest holders of these securities have not sold
sizable amounts of these issues.
It is the
is pictured
From this point on,
kind
.
justments that
in today.
to
whole most institutions
was
that which
absence of that which
these
a
able eye.
as
"
absence of
around
as
...
The combined total is under $8 billion which is considerably less
than there is outstanding in the largest ineligible issue, the
not
due 12/15/67/72.
Zy^s
...
only get 1hese things that I have
been,
telling
must
we
budget
you
not
and
about
only
avoid
LOWER "PEG" VICTIMS
in order;
balance
our
excessive
and
The commercial banks own about 53% of the three eligible issues
and
unjustifiable public spending, but
we
must make up
our
future
home
that
or
we
further
our
minds that
operations
abroad
must
either
be
these, along with the holdings of the Government and other in¬
vestors, account for 83% of the total.
.
.
.
These positions
sidered to be pretty well put, and the owners are
at
are
Insurance companies and savings
con¬
not believed to be
greatly interested in having prices move under support levels.
such
banks hold about 7% each.
.
.
.
.
.
V
OJ?
finance them without
the
deposit banks' positions in the three bonds, country banks account
expansion of bank credit,
for
45%,
can
further-expansion 'of
bank
de¬
posits^ further increase in
our
in¬
"That's flated money supply.'c
~
reserve
city banks, 27%, and non-member banks, 14%.
..These institutions
are among
the
more
...
important elements in
the banking system, and they would be the hardest hit by a drop
'
HQ
much fear
so
quite
;
:
appearing that the "wish is father to the
today is the collapse of its finan¬
investment, and that, I sub¬
everybody else. They bought
they
in¬
that
former policies they believe may be
human to help one's cause along.
inflation
has made America great.
Now, I
in¬
life
of
commercial
banks.
those government bonds under the
avoid
hands
the
and
a
are
opinion
the
financial ruin.
ger
never
dividuals,
nor
Were
in
bonds
billions are
individuals, long-
and invest them in
with
that by
and
until you
.
would break par, are
our
followed
that debt that mature within five
thinly veiled
are going to be made at prices under 100.
\
Those who advised in the past that purchases of governments be
confined to the short maturities, because eventually the longs
second inflation and that may
by a third inflation,
a
toward
more
market fol¬
money
these
of
some
are
fear
or
Undoubtedly hope has been born, and
opportunity is being sensed, at last, that purchases of
strong, is
be
though
as
non-existent, not
just
have to be enlarged
by
uncertainty
same
evident that the surplus of the governments
was
or
variety?
an
is not always followed by a depres¬
They
support.
imposed on them. Why, the banks
<ought to be grateful, not critical,
life
to be
that
sion. An inflation may be followed
need
leaning
eliminated
be
have
don't
that the Federal Reserve foolishly
<of
an
or
it
been supported. That is why they
are there.
Savings banks
have 10. They don't need support.
reserves
Because, believe me,
v
to what is going
as
long governments
System,
which
will
give
this
whole question the works in the
public interest, ; and devise that
which is fair and equitable to all
interests concerned, and a sound
basis upon which to build the fu¬
ture welfare of this country.
serve
But
of
seems
through
see
now
Until it
.
It
.
.
authorities somewhat
interest
which devised the Federal Reserve
of all the
ap¬
operation
not going to be changed from present levels. .V„
from all sides.
on
maybe
me,
all of them, are supported at about
of inflated
supply is concerned. It had
on inflation at all. They
money
tell
the&yprincipal ■ ,<part
are.
95, and they constitute $60 billion
available
be
Oh no, you
early yeats.
.
to
creating the
or
support prices of Treasury obligations.
Could
the E bonds money supply.
Those
get 100. Yes, they get 100, but
things which
can
be
they don't get that interest for done now have been done. We still
two or three years that they as¬ need what I suggested to you at
sumed
they were going to get the close of my remarks 2% years
when they took the bonds. Making ago, some kind of a public re¬
allowances for that, I venture the sponsible agency, like the Aldrich
suggestion that the savings bonds, Monetary
Commission
of
1911,
of the banks.
reserves
in in the
switch
a
Why all this concentrated effort to point out what is going
bank deposits which
our
turns them
play
are
are
to be reduced
lowered
any other, and it is
camouflaged under the respecta¬
bility of the cloak of the Federal
about
on
that
to happen to the economy if pegged prices of governments are not
Reserve System.
It is just as ef¬
fective as an open printing press
95
indications
from time to time
appear
same
seems
..
monetary
as
the Federal Reserve Board raised
rumors
and
feeling
thought."
pointing
you figure it out as I do
with layman's arithmetic, can get
bonds, if
with
...
"pegged" prices
out to you
effective
.
Offerings of the 2%s due 1956/59 have
.
.
market
beginning
are
operations
you,
I
doing very little
are
.
getting the
lowers
neither a bal¬
budget, not even going back
the gold standard, would rem¬
edy
requirements, is
reserve
Because of the clouds that
.
.
positions through operations in the
money
.
.
they have in the past.
pay.
anced
on
.
happen to support prices of the ineligible issues these reports
not
will know
we
resources to
making appropria¬
tions of public money until we
know where the money to pay for
But, mind
higher
as
being carried out, with the proceeds going into the 2%% due
Also some of the 2Vfcs due 9/15/67/72 have been
on the longest partially-exempt issue.
Although
to
We must stop
them is
doubt
no
WISHFUL THINKING
government spending not only so
that
we
will
have
a
balanced
our
.
the
in
1960/65.
need to do.
so
There is
.
sold to take
And, of course, the first thing
that we ought to do is to reduce
within
adjusting their
distant future.
was
to say in the country,
live, what's good for the
is good for the gander. That
budget, but
well
as
the government market, banks
over
peared
'
,
We used
it is
.
Selling of long-term Treasuries by non-bank investors con¬
tinues, although the opinion is expressed in some quarters that
the volume of eliminations is likely to taper, off in the not too
and
*
we
rate,
shorter end of the list.
a
where I
is what
.
Europe
get
was
situation.
goose
future) along with
near
curtailed activity.
on
of carrying out the program.
other than
monetary basis,
absolutely essential
that they stabilize their monetary
that
certificate
way
hang low
Western
of
1%%
a
pro¬
The other day, our representa¬
tive in European relief told a rep¬
that
the defensive
on
(in the
requirements is keeping the government
reserve
that the authorities will keep the pressure on the money markets and
supply.
We have got to get our financial
and
Governments
on
Talk of higher short-term rates
debt,
.
surance
Reporter
our
We have got to stop this moneof
government
tization
bank
can
T
.
Well, very briefly, we have got
to stop this method of buying gold
the government bond market were
money supply.
is
to you
say
not
need, and we do
not want government support of
we
right, but what is he going to do
whether through
speak
the bond market for
Federal Reserve Bank takes them
de¬
supply.
to
ing system at
fixed price.
bank
money
right
no
government bonds into the bank¬
a
con¬
detriment that is involved in the
posits
where it
will
it
buy, when that
posits through the importation of
gold, through the buying of gold—
care
that
Reserve
n
"
in support prices of the longest eligible taxables.
s
♦
24
COMMERCIAL
THE
(1556)
■
CHRONICLE
FINANCIAL
&
the
on
■
■
in
General Pi
government of France 21%; and
the government of England 21%.
people of this nation. Minorities
I repeat, the United States, today,
strong, persistent minorities —
stands at 29%!
wijl always get their way in the
One more factor ought to be
absence of a broad, basic under¬
assessed in weighing the threat of
standing; in the absence of a vig¬
socialized medicine. How do the
orous, intellectual health.
Another thing to remember is political leaders now running for
office stand on this and related
the high
priority the socialists
give to medicine. They include its questions? Omitting any discus¬
socialization in the same political sion of the position of those who
breath that advocates government are avowedly for ever more and
more
"social gains" and confin¬
electricity and housing. The ex¬
(Continued from page 9)
—
a
Liberty
destructive" force to do
work."
You may not agree
with me, but
no
doubt
you
gather from the
foregoing that your speaker does
not
consider
private
the
the
for
future
to
it
bluntly, I think that the future
prospects are dim indeed, and that
the primary reason for this is that
too many of us have been dealing
be
very
with
practice of medicine
promising.
Putting
effects
not
and
The
cause.
to
himself
means.
rush
in
He will
means.
avail
of
the
That is, he will
avail
himself
of
the
fruits of the labor of others. Thus,
V
•/
to
political
creative,
.
economic
in
rush
Thursday, October 14, 1948
they reason, will
self
to
one
his
dence
of
with
bring him¬
man
destruction.
own
If
to rely only on the evi¬
were
times, agreement
observers—sometimes
our
these
referred to
—would be in order.
However,
I
do
not
agree
has
unthoughtful
opinion in America, as elsewhere,
that
effect
the
to
of
is
freedom
intrusion.
Federal
to
with eyes on
"Millions in
a
political
But
now,
our
nation
not
are
social security is
citizens it should
good for every American cit¬
yet secure. If
good for some
luxury, that it can be permitted
only
when
everything
in
the
be
economy is functioning perfectly.
izen. Every American who works
By reason of the prevalence of
these distorted notions, medicine either with his hands or with his
is up for socialization not merely head in no matter what capacity
or
occupation should be entitled
because there are large numbers
who want it thus—not simply be¬ to the benefits of social security.
American generosity must extend
cause it is uniquely vulnerable—
but because it is an integral part not only to our own people, but
to the peoples of the world." r-:
of a socialistic-thought pattern.
The
Medicine, therefore, cannot iso¬
late itself.
It is in the
barrel
same
with the rest of the
pickles.
is the whole barrel doing?
tunately,
How
For¬
Governor
other candidate,
Dewey, has taken a flat stand
against socialized medicine.
But
he is on record as being in favor
of both social security and rent
enlightening meas¬
He
claims
to
have
urement
is
possible.
Economic control.
freedom, the opposite of socialism, thought favorably, once, of so¬
cialized
medicine.
can
be reasonably calculated by
However, he
the percentage of the fruits
of did not want to support it until
one's
some
labor
one
retain
can
himself and do with
for
he pleases.
as
How much freedom of choice does
have
one
erty? is
with
one's
out how it worked
had found
elsewhere.
year
An
expensive,
three-
research program was con¬
prop¬
ducted to find
ques¬
own
tion.
out.
All the find¬
ings
of asking the
a way
he
hadn't
were
adverse.
It
worked
anywhere.
Ergo,
of
Less than
is
a
Taxation
each
dollar
earned
way
this
freedom
use
in
Gradually
point in
our
Socialism
work against the en¬
of
croachments
socialism.
Very
few persons
is 29%.
Apd there are no signs
yet that the, trend has even slowed
today, when thinking
in terms of political science, seem
able to form judgments on the
basis of logic and principle.
They
find it necessary to resort to em¬
pirical tests. How has it worked?
The answer to such questions is
their only basis of arriving at con¬
down, let alone reversed.
clusions
slipping
71
at
take
away
until it
has
or
stands
now
In
all
eral, state and local—is
5%
been
other words, the
governments — Fed¬
cents.
by
choice
of
longer
no
less of earned income.
You
think
may
eaxmed
income
for
It
that 29% of
governmental
purposes is not dangerous,
that
some
freedom
of
choice would
remain
-that
right
there
is
to the last cent,
up
brink
no
*^10Q%, that socialism
short
goes
on
of
be¬
ing gradual in its invasions until
the
time
comes
when
it
is
com¬
plete.
History does not support any
such optimistic outlook for a de¬
layed
one
extinction.
Colin
Clark,
of the world's foremost statis¬
ticians,
which
estimates
the
influential
point
sections
of
at
the
community
support
a
become
willing
to
depreciation of the val|-
of the money to be at 25% or
less of earned income taken by
ue
government.
Lenin
that the
is
said
best
to
way
capitalist system
a.
have
declared
to destroy the
was
to
debauch
He maintained that
continuing
process
of infla¬
tion, governments can confiscate,
secretly and unobserved, an im¬
portant part of the wealth of their
citizens.
In
should
what
to
be
it
this
instance, I must
agree that Lenin was absolutely
right. Now then, if one will ex¬
amine the condition of, the big
countries, the ones with 25 million
or more population, the ones
pres¬
ently regarded as being in a per¬
fectly horrible socialistic and fi¬
nancial mess, this astounding and
frightening fact is revealed: No
less than 18 years ago the gov¬
ernment
of
Russia
was
taking
"*>29% of earned income; the gov¬
ernment of Germany 22%;
the
this
on
platform
present, with
ity, how to
desires
glossing
a
There
is.
over
selves that
we
fact, distressing
is
sense
no
I
and
assurance
tell those
and final¬
The two
cure cancer.
be reasonably com¬
parable in their chance of fulfill¬
ment.
may
To
know ledge
of
akin to the
truth.
freedom and the
its attainment is
me,
possession of ultimate
is
It
a
condition
that
we
in its fullest
achieve
may never
sense,
but
it is a goal always
worthy of the greatest effort, de¬
serving of everlasting pursuit.
My aim, at least, must be made
clear.
It is to tell you, briefly, of
what I know of socialism and,
then, to acknowledge that I know
all too little of how to expose its
fallacy.
Cancer will yield not to
the attempts, however devoted, of
any
one
we
might now;
But, finally—if at all
person
designate.
—to
the
scientific and pa¬
sober,
we would not avail our¬
selves of it. Even my dog respects
approval of hirp
my
he
will
not
much for human
Tne
is
second
ouires
in
saying to our¬
do not have to in¬
it,
in educational presenta¬
dulge
tions, empirical in character. We
do.
These presentations must be
persistently made and ingeniously
designed, or we shall fail.
the
to
to
means
as
desires.
is
be
method
a
fact to be known
as
enough of a
a law, to the
proper
nature
understanding
The
spread
understanding
in the extreme.
tive
would
reason
somewhat
as
fol¬
restrict, destroy.
creative.
Medicine
is
It is not
is to suffer the degradations
Oswald
Spengler,
author
of
of
important synthesis
an
history, concluded,
the evi¬
past, that our civil¬
of the
dence
is
in
stage
a
of
fruition,
near.
is
Arnold
produced
another
synthesis, concluded differ¬
ently. He disagrees with the inevitability-of-history theory.
He
maintains
that
each
civilization
possible resistance.
There
two
are
ways
to
satisfy
desires:
The
(1)
economic
By
means.
this is meant satisfying one's de¬
sires with the fruits of one's own
this
is
one's
adequate
"W,.:r
political
meant
desires
By
means.
the
satisfying of
by using the fruits
.'"''V
of the labor of others.
The
to
response
the
chal¬
lenges they presented.
tion
challenge
is socialism
of
amorality.
an
'
labor.
the people did not make an
The
of
consistent
as a
servant for these lim¬
ited purposes increases rather than
diminishes
liberty.
Using
re¬
rid
our¬
selves of that which is bad is
con¬
straint
or
destruction
structive.
However, I like to re¬
the
serve
to
"creative" for
term
a
highef form of human behavior.
The second, the
is consistent
deed,
it
is
with
political
means,
socialism.*
socialism.
Its
In¬
motto
first stated by St. Simon and
later held up as an ideal by Karl
was
the
use
of
others.
means
has
man
been
will
no
State
and
other forms
adequate
lenge
our
If
This
cannot make
response to this chal¬
civilization is doomed
old-world
to
we
authoritarianism.
lies, first, in each
.personally, understanding
the fallacy of socialism and, sec¬
ond, in creating a desire on the
part of others for a similar under¬
standing.
Sumner
Slichter
expressed
a
thought that can be used to draw
of
response
us,.
enterprises outside of agriculture,
and
about
that
million
six
business
the
American*
the ,'state
Let's
look
at
by the admission of all its
advocates, is the all-responsible
states The all-responsible state is
the ultimate goal of socialists, be
they the brand who hope or prom¬
ise to achieve this end legally and
peaceably, or be they communists
ism,
achieve the
who would
available
longer depend
end
and
job to be done, there must be a
dictator, one who will imprison
or murder anyone who offers dif¬
fering opinions or who questions
his authority. Italy and Germany
did not get tyrants at their head
by accident, no more than did
Russia.
These despoilers of life
property were and are as nat¬
their respective socialistic
ural to
situations
fungus
as
a
on
muck
heap.
How
this
does
when
it
form,
come
salmagundi
causes
ists
this
all
political
arrives
in
its
about,
which,
ultimate
its protagon¬
cry,
"But I didn't mean
It comes about just ex¬
to
this"?
actly
as
here
even
it is coming about right
in
America, step by step,
item, the loss of one free¬
dom of choice after another, the
piecemeal transfer of individual
responsibilities to the agents of
item by
government.
In short, it is the
redepositing of the God-given en¬
ergy existing in many millions of
individuals into a political entity
call
What
The
is
State.
the
real nature
of
this
political entity?
Isn't it an ab¬
straction, that is, in the sense that
it
is
void
of personality?
The
state as such—that is, the state
separated from its agents—has no
soul; it has no money; it has no
intelligence; it has no initiative;
it cannot invent; it cannot create,
nor can
it perform an appendec¬
tomy.
Government, i:i its earlier Amer¬
sense, was the right of all
citizens
to
self-defense
which,
instead of exercising themselves,
ican
transferred to legally con¬
agents. If one thinks of
as this monopoly of
they
stituted
government
force
one
"to
terms
force,"
will
as
those
To
think
then
govern,"
of
the
"to rule,"
"to
synonymous.
who
various
advocate
ownership
it in. two
(1) how it is brought about,
(2) what it is like when we
get it.
•
of government as force
—
it be¬
pertinent to make inquiry
about these agents. Leaving aside
comes
the
of
manner
which has
their
bearing
a
on
selection,
the rela¬
tive competence between bureau¬
crats and non-bureaucrats, in what
ways
do they
as
agents of gov¬
ernment differ from themselves
as
in private life?
Three
ways:
(1) in the coercive power
they can wield over others, (2)
in the changed personality which
the possession of this power con¬
persons
fers
on
fect
on
them, and (3) in the ef¬
them of the
themselves,
bearing
for their mistakes.
ways
made
same
violently.
It ought not to require any ex¬
planation to demonstrate that the
all-responsible state must also be¬
come
the all-authority state.
At
the head of the all-authority state,
by reason of the nature of the
illegally
time, think of the agents of gov¬
ernment as government—instead
and control of the means of pro¬
duction.
governmental agents, it follows
these agents must assume a
like measure of authority. Social¬
that
econ¬
innovations
is
to
forms of socialism and, at the same
nearly 10 million places
may
be au¬
thorized. Have you ever thought
of that? Ten million places where
experiments may be tried, where
no further authority is needed to
authorize
an
experiment.
Our
economy operates under about 10
million separate private business
budgets."
>
WittoRifchis in mind, with the
knowledge that all energy springs
from individuals,? with this ?re¬
minder of free human energy and
its release, let's take a look at
socialism. Bear in mind that so¬
cialism
then, if citizens wish to be
of the responsibility for
phase of their own welfare
by turning that responsibility over
some
This
agriculture.
omy has
where
Now
relieved
we
this civiliza¬
first, the economic means,
with the voluntary
society and the free market econ¬
omy.
Its motto is, "To each ac¬
cording to merit."
Government,
that is, police force, plays an im¬
a contrast between socialistic
re¬
portant but minor role, that of gime and its opposite, the volun¬
securing life and the right to sus¬ tary, free market society:
tain that life, which is property.
"Our economy has the tremen¬
Government, performing only as dous
advantage
of
possessing
organized police force, destroys or three and a half million business
is
that
use
on
cause
Ergo, it doesn't make
to
the alterna¬
his desires along the lines of least
Many thoughtful observers have
concluded that once the political
sense
difficult
civilizations declined and fell be¬
highly
creative function requiring initia¬
tive, inventiveness and enterprise.
a
But
is
AH Responsible
Socialism,
and
present its challenge, that former
man
"Socialism is the state owner¬ Marx, "From each according to
ship and control of the means of ability, to each according to need."
production.
The unique charac¬ The government must be master
teristic of the state is police force. because only by the employment
the
coercive
The only thing the state has that of
powers
of the
you doctors do not have is this police force can the fruits of the
sanction to use force. Force can labor of some be expropriated for
repress,
the
socialism.
of
means
lows:
of
will tend to satisfy
effect that
ployed
There is one other reliance. The
powerful influences, but by
far the less numerous, are those
judgments based on logic and
principle.
A person who acts in
this fashion, though never in his
life
having heard of socialized
medicine, would have been able to,
reject the idea with only a few
seconds
in.; contemplation.
He
This
there
development of this wide¬
enterprises in
;
as
of what constitutes proper
cialism will be
installed.
functions.
governmental functions.
However, sole reliance on this
empirical method is dangerous.
By the time the candidate who
opposes socialized medicine finds
out by slow and laborious research
that rent control, social security restrains
that
which
is
bad—
and
other
such
things do not namely, fraud, violence and,pred¬
work, the show will be over. So¬ atory practices. Government em¬
.
satisfying
accomplished only
wide
a
of
It is to limit government
again to its
can
re-
working together. It is
away
with the political
do
such
itself.
disease
saying,
a
co¬
our
who
as
voluntary,
a
operative task, something that
To.ynbee,
is
beings to impose
themselves?
on
end
Now,
hamburger
placed before him until he has
my assent. Is such a behavior too
that • the
There
much that
so
touch the
ization
only in this manner—will
means
available,
tient efforts of many accomplished
men and women!
In this manner
(2) The
Well, here is
as
socialism.
prevent
wish I could do this just as many
of you wish that you could stand
done.
most
the currency.
by
as
how to
socialism receive its uprooting.
This brings me to an important
more
or
to
wished.
he
any
Encroachment of
hundred years ago
could retain 95 cents
one
of
High
and
cure
tell you
could
—and
he
against socialized medicine!
Dangers
wish I
I
Washington, he says:
person
at the same
never
industries,
abundance
an
another
of
care
forecasting. It is the same as
saying that there is to be no mas¬
tery of cancer simply because it
t
is
accepting the
the financial
Try, for instance,
responsibility
for
this
yet been mastered.
systemic disease here at issue is
transportation ing it to those reputedly conserva¬ socialism.
What
we
need
and
tive, we find Governor Warren
Two Elements of Hope
and finance run a second to med¬
must have
is some professional
openly and insistently in favor of
icine.
To me, there are two elements
attention to the disease and less
compulsory health insurance, the
of hope.
Socialism,
except
in
certain
Both rest on rational
certain forerunner
of socialized practice on the surface eruptions.
rare circumstances, begets social¬
This
is
true
because
socialized processes. The first is strictly per¬
medicine. At each regular session
ism. Not only does socialism have
medicine is nothing more nor less sonal—something I can do for my¬
of his state's legislature he has
an eroding effect on the economy
It is to
than one of the many symptoms self; you for yourself.
embrace as our first desire in life
—impairing its sturdiness—but it fought for a health program, and of the disease.
a big one, too.
He has argued that
that of self-respect and the respect
corrupts
reason
and
morality.
These in turn create the political state action is preferable to Fed¬
of our fellowmen.
Thus equipped,
Can Socialism Be Cured or
climate for more socialism. There eral action, in fact is an antidote
even
with
the
Prevented?
tractive
principle whether between man
and wife, two persons in a kitchen
cooking a Sunday dinner, between
doctor and patient, or between
citizens and agents of government.
without,
time, assuming a com¬
mensurate authority over his or
with -her expenditures.
"prophets of doom"
as
ity must always go hand in hand.
That
is
a
prime organizational
respects
and
taxpayer, not
the penalty
In such other
and behaviors
.
To
avoid
chaos
.
and
utter,
con¬
fusion, responsibility and author¬
as
there
are
to
motives
they remain as they
were in the
first place, just or¬
dinary folks like the rest of us.
How,
I
ask,
would
these
influ-
Volume
Number 4742
168
COMMERCIAL & FINANCIAL
THE
'
will
ences,
vidual
your
political
Would your creative
that
be put in a cell in a
organism, an organism
must eventraslly become life¬
which the advance of
less
because
if applied to you, enhance
competence for the practice
of medicine?
faculties,
on
medicine
ened
is
doctors
You
kind of
do you
human
know
na¬
What
us.
personality and character
find in the sort of
who is used to
person
getting his
by
way
force and threat of force? Remem¬
ber that such persons must
finally
run
the all-responsible,
all au¬
thority state, for no one can be
finally responsible for another's
unless
actions
he
restrain
can
or
Actions which would en¬
danger the object of those in pow¬
suppress
A doctor cannot take any re¬
er.
sponsibility for care of a patient
unless the patient follows the doc¬
tor's advice and prescriptions. In
a
voluntary society such coopera¬
is on a voluntary basis, and
tion
the
the
But
himself.
disciplines
patient
and
one
only
for
reason
government into the pic¬
in socialized medicine, is
calling
Russia,
taxes
on
1 realize
far
expropriating
of
one
fruits
the
group
-
applied, and Rusians could get
relief
countries
from
effort
human
where
sup¬
posed benefit of another group.
What are they like, these heads
as
you
America
I
energy
your
Few:
us,
the
"In
pro¬
chances
of
struggle for the rights
No Easy
for
fight first of all for the rights of
minorities
; next for the rights
of all men; and last, if at all, for
belong
minorities
to
..
must
.
their own."
in
110
successful
If
liberty.
we
workings of human
some
lines of busi¬
as
a
the
them
have
from
those
had
who
taken
of
responsibility for their
ilege for anyone.
I can't see any¬
thing
idea.
It
precisely, with
find
not
these
slaves
cringing,
to
seems
welfare, the victims of coer¬
the
cion
and
intimidation?
Do we
own
with
wrong
square,
basic
the
ideal
American
alienable rights.
If
of
in¬
would re¬
we
peal every act on the statute books
hypocritical, sly and unprincipled, that confers
special privilege—and
sullen and apathetic, uninventive
reject every new proposal which
except in finding ways to avoid has
any of this nefarious element
responsibility
and
punishment, in it—there would be no social¬
deficient in self-respect and in
ism.
And there couldn't possibly
respect for the rights of others, be
any socialized medicine.
mean-spirited, suspicious and un¬
Probably most of you would
responsive to gestures and acts of
agree on the merits of this idea
goodwill and. friendship?
of no special privilege for any¬
Contrasted Free Economy
of
Compare this all-authority state
and the human gadgets
who
com¬
Schlicter.
No
be
■
the
how
meant
speak just a word
me
about
belief
a
it.
know
You
"liberalism"
word
in
liberty.
once
You
of
tion
government industries, enter¬
prises and services Can only give
the appearance of survival if com¬
petition ; from private individuals
and
voluntary, groups
be
re¬
pressed. Therefore, the further the
governmental function of force is
extended, the more it.rstricts the
number of points from which ini¬
tiative, invention and enterprise
-may arise.
;
Gone will be the energizing
foiice of millions of individuals in
-pursuit of their self-interest.
In
its stead will be the political in¬
■
and freedom it
erance
know
You
for.
edly
uses
and
stood
avow¬
tactics to
their own
corrupt to
good word that becomes
any
So, I expect the objec¬
popular.
tive- of
once
it is
communist
good
distort
that
"no
special privilege" to
and perverted to
collectivist uses should it begin to
be reinterpreted
attract
a
let
make
me
mean
by
anyone.
anyone
another
following.
no
I
to
clear
recession
could make any par¬
what
I
special privilege for
no legal right of
mean
live
by
the
fruits
of
only
of
fear
a
dictator and
of
death
ment
man's
subsidies
his
imprison¬ tions always are designed as spe¬
ment for noneffort.
cial protections to favored pro¬
Gone will be the rights to life
ducers.
I mean also
no
special
rates of taxes or surtaxes on any ¬
liberty and the pursuit of happi¬
ness.
or
with each person free to de¬
velop his own potentials. The
self-controlling
responsible
once
indi¬
one,
to
for these
benefit
of others..
are
some
always intended
at
the
expense
And, of course, I mean
times since
total private debt has in¬
only about one-third. To¬
1939,
creased
tal
liquid assets in 1939 were 57%
private debts. They are
138%; they substantially ex¬
ceed total private debt. The total
total
of
descriptions of 1920 to show that
issued by promi¬
nent and competent people at that
time, all to no effect. With all
respect, the warnings uttered by
the stock market in September,
1946 and over and over again by
many people since have not been
warnings
were
overlooked.
cultural
the
gov¬
same
would
supports.
It
effort
much
exclude
we
be
would
to
not
produce
a
If
improbable a si¬
gold
outflow, the
as
multaneous
credit authorities might have only
to stay put to see abnormally easy
credit conditions re-develop, and
The contraction in pri¬
for
capital, loan
demands
ber
flow
return
and
of
would all tend to pro¬
a
result.
automatic
are
devices.
compensa¬
addition,
In
conscious
there
such
measures
as
reduction, reduction in mem¬
bank reserve requirements,
now
opens
The
business
tified,
has
world
conservatism and
shown
good sense, for
ironically,
by iear, that ■)
bust is around the corner.
works
have
programs
servative.
Public
been
con
mament
ECA
On
action from
inflation,
that
there
must re¬
we
certain
are
standing commitments under the
situation.
present
The
Recovery Program is
of
billion
a
ready
our
in
European
these,
one of
the
exports
our
dollars
a
month.
have
exports
spring
this
taken
to
standard
our
of
living.
it,
they reduce
contrary,
for
they take labor and materials
from
the
production
of
goods that would raise our living
standards. We support the defense
away
programs
because
we
want secur¬
ity and
we support ECA because
hope for future benefits.
We
know that both keep pressure up
in the inflation boiler, and none of
us
is
wise
final
con
enough to foresee the
sequences.
We also
know, however, that these expen¬
ay
help support business
they last.
I don't suggest
government spending could
support the whole economy if
private business started to liqui¬
while
that
date, but it may have a profound
influence in delaying private
liquidation.
In conclusion and summary,
the present level
Al¬
dropped
30% from the peak reached
some
lift
the
road
progress.
ditures
Finally, in attempting to gauge
pattern and extent of the re¬
the
member
perpetual
Neither ar¬
expenditures
nor
the
sure
a
economic
we
liquid assets It will stabilize
people have somewhere near
the
and
increased almost 3J/2
of
1947.
We
have
drop in our stride,
sc
far as its overall effects are con¬
analogy with
the
and such pe¬
people see is
deceptive.
The
differences are
more important that the similari¬
ties.
Many of us exaggerate the
which
riods
amount
the
of
1920
many
froth
there is
that
in
fail to give due
stress to the immensely
greater
of private debt today is well be¬ pect much further decline as long
financial strength and the absence
as
ECA operates.
low the annual national income
Then we have
of any real monetary strain; anti
Before the war it was two-thirds our commitment to increased na¬
tional defense expenditures; they we overlook the standing commit¬
larger than annual income.
ments
under the present situa¬
Inflation
is
primarily
debt- will be larger in this fiscal year
tion.
making and deflation is primarily than they were last year, and they
debt-paying.
Our private debt- will be still larger next year. We
making in the past year and a half
has been at a rapid rate.
We do
not want
to
that rate
see
contin¬
cerned, and I
have a
is
see no reason
stockpiling
which
buy metals
materials. And
program,
commitment
a
to ex¬
to
and other strategic
picture;
we
Robert Diehl Joins
Bempsey Tegeler Go.
the alleviating fact is we have the commitment to sup¬
private debt-making dur¬ port farm prices, with which you
(Special to The Financial Chronicle!, '
ing this inflation has not been ex¬ are all familiar. The normally de¬
LOS ANGELES, C A L I F.—
cessive in proportion to capacity pressing effects of a decline in
Robert D. Diehl has become asto pay as measured by income or farm
prices, which has already
liquid assets. The kind of finan¬ begun and which seems certain to
cial strain which was present both go further during the coming year,
in
But
our
1920
alds
1929
and
bust
a
or
which
and
severe
a
her¬
liquidating
depression does not exist, speak¬
ing generally, either
rowers
been
among
bor¬
lenders.
or
Our
Therefore,
now
while
business
all
that
means
labor; no govern¬
or price
supports
syco¬ because these always are aimed
phants.
at giving a special benefit to some
1
Gone will be incentive and, with
group or class; no government re¬
it, creative genius. There will no strictions on competition, enter¬
longer be reward for effort, but prise or service, for such restric¬
terest
that
say
of
ued.
it
that
under
cover
half of
At
,
their liquid assets.
Without at¬
tempting to be precise, I should
word,
take
until today
pay-as-you-
up
but how much too high? and economic study,
Early last etc.
Many of us are perhaps over¬ year I engaged in a public debate
Please don't draw from my em¬
on the business outlook in which
estimating the excess and there¬
phasis of government spending in
fore overestimating the recession the gentleman on the other side
this summary any implication that
rather pooh-poohed the - idea that
need to correct it.
I
think
government
spending
In the second place, we may recession was being foreseen and
eliminates the business cycle and
underestimate the Stabilizing fac¬ prepared for, or that expectation
the very an¬
tithesis of the philosophy of tol¬
to
longer will there be millions
points at which decisions can
made, experiments conducted.
For
caution
it with the earlier descrip¬ also know how advocates of oldthe free economy by Mr world
regimentation have learned
pose
of
But let
one.
the
any
individual
by unemployment bene¬
fits, deferred public works, public
assistance, national defense, agri¬
tax
result of business experience
ticular difference. He quoted from
or
more
swollen
are
of
over
011
revenues.
expenditures
tory
(Continued from page 2)
tors in the present economic situa¬
tolerant and understanding, energy
in
sufficiently
simple
people must be who have to get terms, the desire to gain a wide- tion. One is the financial strength
of agriculture, business and peo¬
along with other people on a vol¬
pread understanding of our cause,
ple. .Agricultural prices, for ex¬
untary basis because force is ruled at this
time, would appear hope¬
out?
Or are the coercionists in¬ less.
ample, now show weakness. This
tolerant,
arrogant,
domineering,
may be, and probably is, evidence
There has been so much sheer
that we are passing through the
and bullying?
Do they not be
bunk, so much propaganda, so
come more
and more insensitive
peak of the price cycle. But what
much intellectual dishonesty dur¬
to
the
wants
and
interests of
do we find when we look into the
ing recent times that people re¬
financial significance of the farm
others, unscrupulous, even hard
gard skeptically anything anyone
and brutal?
Jealous of their pre¬
price change? Farmers on Jan. 1,
says or writes, regardless of the
1940 had a little over $4 billion of
rogatives, do they not become
intelligence and honesty of the
more and more greedy for power,
currency, bank deposits and U. S.
message. "Whose axe is he grind¬
savings bonds, and their debts in¬
quick to take offense at any spark
ing?" seems to suggest the nature
of independence in those beneath
cluding both short-term and mort¬
of this skepticism.
them, yet fawning upon those who
gages
exceeded $10 billion.
On
Jan.
may give them more prestige and
1, 1948 their liquid assets
Special Privileges
were
more power?
over
Are they not com¬
$22 billion and their
Perhaps understanding and con¬
debts were $9 billion.
bative and ruthless, yet suspicious
In other
fidence would be enhanced and
and
innately
cowardly
because
words, their liquid assets are 2V2
spread if we would unite on a
times their debts, whereas before
they fear retaliation or rebellion
program suggested to some of us
the war their debts were 2V2 times
from their victims?
by F A. Hayek: No special priv¬
what
time
These
as
And
taxes
ernment
currency
duce such
Business Outlook
easy
drop
For
principle make
go
liquidation,
kind,
turned
setback.
income
quickly.
Exaggerated Froth in
prices and in
would
similar
ness,
to become
us
practitioners
income
vate
Way to Be Practitioners
conclusion, there is
way
ment
quickly and sharply than in
good-sized government deficit.
to be checked.
zero.
otner
compensating
will
come
into
play
influences
take
versus
of Liberty
In
mentioned,
their skins and their souls—those
who
killing the fly will be
In ad¬
of all men—which alone will save
as
specific instructions from me your
practically
sets in.
promptly because they will do so
almost
automatically.
Govern¬
patients, for
for your friends,
and for your fellow men every¬
where.
For only where special
privilege is ended, can the indi¬
vidual
develop the strength of
character, soul and body which
make for the good life.
Finally, I believe we should
heed the advice of Milton Mayer,
given in him pamphlet, These
for
families,
you,
your
il the ravages of
point about free
real recession
a
for
authoritar¬
This may seem to take thought
ianism by a crude illustration. Put
and effort far beyond and above
you and me in a bare room with
the day-to-day calls of duty in
one
fly, you with a fly swatter.
If your every move must await
luman
if
I
special privileges
collectivism are
these
of
a
think
dition to the supporting influences
it,
to the
of enlightenment
nature
like
begin
as you
25
believe you may see
that the problem also has its per¬
sonal and immediate implications
about
from
are
(1557)
profession. Yet,
your
group
do how
more
recognize and
gram
remained, all Rus¬
make my
can
I, and millions
must
who de¬ have to await someone who will
vote their lives to the coercion of
scientifically outline the nature of
others?
Are they considerate and
man and the
of the all-authority state
well
as
in
we
and
no
free
sians would starve.
the
of
for the
or
achieving abolition of such spe¬
cial privileges.
I know that this
nation is shot through and through
at Russia has
ion, the reason!
with
special
the standard of
privilege.
even one-sixth
Special
is because the privileges have become so numer¬
living'of Amerw
ous that
Russian socialistic principles of
they seem no longer to be
but universal, and they
coercion and force are not totally special
are so
well-entrenched that they
applied.
There
is a
one-sixth
leakage of free human effort!
If appear to many people as natural
rights.
he socialistic principle were 100%
Yet, I believe that you
t
labor
person
all-responsible,
In my opin-
example o:
all-authority sts
Regardless
of
ture, as
how diligently I try to instruct
to bring to bear the coercive au¬
you, this will remain true.
Hu¬
thority of the State.
It is for the man energy depends on volition,
purpose
of forcing the will of the
functioning of free will.
some
upon
the
lives of some
others, usually for the purpose of
any
the
supposed benefit of any
others—either at home or abroad.
its|lells cannot live.
today,ft the most glar-
ng
better than most of
ture
sharp¬
dependent be
dulled?
or
no
for
CHRONICLE
debt
public
huge.
-
has
making
But government debt
is far less shrinkable than private
debt.
The
and
Treasury
surplus
good
I
show
wish
in
has
had
recent past
would continue to
it
surplus, provided it
a
achieved
r a
the
through
were
economy.
I
doubt,
however, that we should
expect debt reduction in the fore¬
are
to
the
our
ment
if
we
any
profound influence
supply.
Govern¬
money
debt will
move
into
will increase again.
foundly
shrink at
all
depression.
It
not
This is
a pro¬
fact
which
strikes
ex¬
the
new
doses
of
me
is that people do learn something
Robert
inflation
Di»ihl
injected into
situation.
We might say in sociated with the Los Angeles of¬
language of biology that as fice of Dempsey-Tegeler & Co.,
simultaneously
deflationary infection sets in in¬
flationary antibodies are turned
210
off¬
the
loose
in
the
bloodstream
to
Certainly
West
Diehl
was
Seventh
Street.
formerly
manager
Mr.
of
corporate trading department
of Wm. R. Staats Co. Prior there¬
set it.
important fact.
Another
considerable
by
ascendant
are
have
a
these supports. Farmers
have large crops, and at support
levels their money incomes will
be pretty v/ell maintained. In the
case of cotton, which is supported
by the loan at a little under 31
cents, the growers will have a
cash income out of this crop $500
millions larger than last year.
Needless to say, these various
supports are inflationary.
What
we are saying is that as deflation¬
ary
influences
move
into
the
seeable future to be large enough
on
inhibited to
tent
these
antibodies will
inflationary
become numerous
to
he
was
with
in Cleveland.
McDonald
&
Co.
(1558)
THE
COMMERCIAL
(Continued from
of
6)
page
lug followed by the Federal Re¬
entirely free market in gov¬
securities, or possibly I
an
ernment
should
Banks.
for
serve
The
facts
that
are
3iational debt of
in
all
of
sorts
have
we
some
forms
a
$250 billion
held
by
all
ijorts of holders.
^matures
7vithin
1,0
or
12
be
Over $50 billion
becomes
optional
months
refunded.
will
and
Well
have
$50
over
billion is represented by E, F and
Bonds which for all practical
lack of any market
government securities.
As I
see
Composition of National Debt
.
it,
level
say
a
the
the
question
is
at
is
to
be
market
what
have
we
sup¬
Vz%
rate.
Based
official
on
statements
by their actions I feel that
and
we
can
be
My
in
the
increases
mitted
out
in
the
I
short-term
full
recognition
the
of
fact
has
gone
creased
in
"the
$20
billion^ by
insurance
companies. The National debt now
occupies the center of the mar-
of
over
bet for investment and short-term
Ixmds.
Liquidity is of the essence
situation that penalizes
'
and
any
the
of
these
obligations
holdings
into
cash must have far reaching con¬
sequences in the business system.
owners
when
converting
As Mr. Allan Sproul has said "In
the face of
Federal debt of
a
over
far
so
right
to
as
sug¬
combination
raising reserve requirements,
gradually raising the rediscount
rate, and raising the- Interest rate
admit that I think
a
Admin¬
new
by individuals? Might it not be
istration could lower the bid to,
too drastically deflationary if a
say, 98 with much better grace
decline in quoted prices impaired
than the present Administration.
the liquidity or solvency of our
Nevertheless, there is no assur¬
commercial
banks
or
at
least
ance
that lowering the bid for
caused them to adopt a highly de¬
Victor.y 2V> s to say 98 by a new
flationary "credit
policy?
And
Administration might not be just
what of the problem faced by the
as risky as if done
by the present
Treasury in refunding $50 billion
of
annual
monetary
maturities
plus raising
E, F and
might be liqui¬
dated in wholesale quantities for
psychological reasons only?
In
jfact, I don't think it is a case of
choosing between support or nonsupport of the market. The im¬
the cash
<3-
R.
to redeem the
bonds
told
I
miss the possibility of
as
though
to
have
vest rate,
we
will
con¬
the
present
pretty much the
set of
same
controlled within limits
fiscal,
monetary
careful
and
No Limit to Federal Reserve
that
Bank
The
credit
serves
question
quite
has
frequently,
been
"How
asked
long
can
the Federal Reserve System
sup¬
port the government bond mar¬
ket?" The answer is that the mar¬
reading of the testi¬
to emphasize that
,
ket.
be
can
the
present
House
'"if
it
is
the
Committee that
desire of Congress
supported almost in¬
Present
excess
re¬
the
Federal Reserve
increase member bank
might purchase, I
see
it
done
■challenge
ehowed
no
Snyder
the
Senate
stated
direct
a
that
lion.
to
way"—a
have been
of "Peck's Bad
gram?"
to
we
of
you
banks
how
would
excess
reserves.
it
within
been
replied, "I certainly do."
No Free Market Likely
In
my
opinion
we
can
J
is to
which
are
that
free
the
-
area
monetary
the
au¬
to
most
operate
drastically.
another...way,, the
rate
terms
and
the
has
rate
redis¬
short
on
be.
increased
only
slightly without further jeopard¬
from consideration the possibility
follows
reduced;
count
dismiss
!
ber
banks, but leaves other credit,
channels
wide
open."
The alternative to creation of «£i
national
monetary
,commissi'8Bi
be, I fear, a day-to-day it7
tempt to solve the problems, of:
will
•
.
in which
we
deed,
of the stated
one
have been
cast. In¬
member
quirements
bank
re¬
enable
ated
by
could
such
be
in
creases
system
absorbed
credit
Parkinson
looked
first,
have
to
seems
two
Mr.
The
by
the
Federal
and invest
proceeds in corporate and mu¬
nicipal bonds, mortgages, etc., and,
the second, that it has been their
selling that has been in major part
responsible for creating the re¬
serves
which permit a multiple
expansion of credit to which he
so
strenuously objects. The facts
between
7
j
1
can
.
-
short
a
flotations
time
the
into
which
dollar
will
taken
that
Northern
States
ferred. The latter
Power
provide
place.
preferred
As
more
than
It
ferreds
small
yields given by other
TYPICAL PUBLIC
BONDS AND
77.y7Amonnfr;;'
Date
or
PREFERRED
Issuer
(millions)
77:77+
s
5-17-44
New Jersey
•
3.0
1-44
24.5
11-
1-44
12.5
4-12-45
50.0
Power &
Preferred
Light
1st Mtge.
30
30
3
4
—
Edison
Metropolitan
1st
3.94
2.81
102.625
3.80
inflationary expansion of credit
7--2-45
'25.0
10-24-45
13.0
is
10-24-45
agree with
statement that:
12-13-45
Government
results
an*
increase
in
the
inflation
an
looks
the
fact
that
12-11-46
30.0
5-46
12-13-46
1-22-47
13.0
6-26-47
N.
2-18-48
25.0
2-
5-48
15.0
3-24-48
12.0
3-24-48 C
selling
6-17-48
6-17-48
10.0
8-11-48
Philadelphia
"an increase in the
money
and
when
sell
inflation
an
the
and
of
our
insurance; companies
that the
Electric
banking system
has been commended by. the Sec¬
1st
-7-7
Electric
&
Gas
•
Penn
•„
-
3.64
3.50
35
1st
Mtge.——
Kansas
7
Mt'ge
City Power & Light-1st
Mtge.
•—
States
Power
1st
preferred
3.65
101.43
3.70
102.875
2,62
102 '
3:68
2%
—
101
3.75
1.02
1.0®
30
99.25
100
4.30
3-
30
101.19;
2.94
77.7
101.205
4.15
1.1®
27/8
30
2.91
101.515
^
101.25
"3.95
30
.
101.59
*2.92
V
102.7,
1.3®
1.2 X
4
2.80
4.71
1.15
1.7®
II
me
3.60$;
0.96
2.57
100
4.30
4.80
7771943
Price
4
0.85
2.68
102.70
0.9d
2.69
30
25'
Mtge777~ 3
Preferred
7'--V ■.7".7Yield
3 3,4-%
101.33
4.20
1st
Preferred
Northern
2.70
104.11
2%
1.12
tog.
2.65
33A
——
Power
30-year 2%%.. bond-—.7,....+2.60%
High-grade
101.02
102.85
234
___-7'
0.99
2.70
3.75
'
101.75
—;7 -i 3%; 7
Electric
101
100
102.06
3.80
Mtge.
—^
TABLE
"' 7.
1st
——_———
.LIT
2.63
3.75
30
2%
Mtge
102.50
104
30
23A
——3.60
—--
7+..
"'7
Mtge.—
Preferred
/
i
'
3.70
supply
money!'
25
33A
Mtge.2%
1st
Preferred
West
20.0
companies, that there does result
12.0
State
r Preferred
8.0
7-15-48
1st
Electric
May Dept.' Stores Deb
;
5.0
initiative rests with the insurance
Y.
Preferred
15.0
9.0
23A
Kansas City Power & Light 1st Mtge.'
2% 30
Preferred
7——3.80
77
15.0
6-26-47
(Mo.)
Niagara
Pref-rrcd
10.0
our
Electric
Philadelphia
36.0
12-13-46
.
,ti-7—___7...._,.7,—.»
Preferred
30.0
12-
—_
Deb
Preferred
Buffalo
35.0
there
of
the
Union
4.0
money
Bonds,
.Preferred"1
56.4
1-10-46
"If, out of the operation of a sale
by the insurance companies of
,
California
2.77
101.375
Union
of
104.625
101.50
Preferred
Oil
Yield
%
30
2%
Mtge
24.0
cannot
in
Yield
yrs
9.0
5-17-44
11-
Offering
Div. Term. Price
25.0
Parkinson's
STOCKS
Spread
;'
■■
5-10-45
Mr.
total'
Eleemosynary
Coupon
System
companies
very
I
OF HIGH-GRADE
7-2-45
I
a
iunds and educational institutions
quality, and
OFFERING
cases pre¬
their
of
assets.
process
insurance
been,
high-grade-
only
percentage
^.*.7-4+——-7™.—7,+4,»:"3.90
New York Power & Light 1st Mtge.
2% 30
Preferred
1——,
3.90
the
as
disclose
have
with
case
constitute
invested
TABLE
inflationary credit expansion, this
was
just as inflationary as the
granting of an equal amount of
continuing.
as-
clues
will
stocks
panies, although in most
pre¬
good 34%.
a
issues of comparable
is the
priced for
was
public sale to yield
municipal bonds, mort¬
gages, etc. From the standpoint of
by
prices,
bonds, the largest aggregate hold¬
ings of preferred stocks are in the
portfolios of life insurance com¬
doubtedly influenced the bidding
for
June
Federal Reserve
indicate that this
years are-
effected
Kansas City Power & Light pre?
in
dealers'
hands
un¬
and
the
"bear
why this unprecedented change-
has
of
The existence of unsold blocks of
reinvested the proceeds in corpo¬
would
the
An examination of basic market
conditions
million government securities and
of
distributed.
extent to
translated
ferred
30, 1947
and June 30, 1948, the life insur¬
ance
companies liquidated $2,356
rate
new
preferred:
shown in Table II.
followed
offering
the
Power
yield!
to
latter
States
by a combination of ad¬
ferred, which was priced to yield verse factors, some of the most
only 1.15% more than the com? important of which may be of a<
party's bonds. Only a part of that temporary nature.
issue was placed at the offering
What Investors Make the
price, and current market quota-?
Preferred Stock Market?
tions are about six points lower.
the
that
Buffalo
of
case
before
completely
The
Kansas City Power & Light pre¬
are adding direct¬
ly to the inflationary expansion of
credit when-they sell long govern¬
to
the
was
over¬
major
nies themselves
ments
changes in the past two
in
dale
Northern
Power.
points—the
the insurance compa¬
that
market" in preferreds has carried
is
apparent
when
the
the
ago
Electric. But since the
has gradually increased,
culminating in a difference of
1.79% in the yields given at of¬
fering prices of the bonds and
preferred stock of Northern States
purchases
expansion."
was a good!
original of¬
the
spread
and thus be unavailable for mul¬
tiple
after
Niagara
cre¬
through in¬
requirements
reserve
weeks
0 85%
more-
that "new reserves
so
two
until^a
up
yield differential
only to a minor extent from
1 %, ranging from 1.17% in the case
of New Jersey Power & Light to
government > securities
maintain the long-term yield
to
that
seen
varied
long-term
level"
be
fering
year
System to acquire
more—if necessary many
ket, however, that it
It will
the
"to
was
Federal Reserve
reserve
stocks
years.
reasons for
requesting the increased authority
over,
preferred
floated by by
the
company's
outstanding:
typical companies of high credit' 3.60% preferred. Such was the lowstanding
during
the
iast four estate of the preferred stock mar¬
it is not because the in¬
thorities
whic^h the Secretary
"blunderbuss that hits memberand borrowers from mem¬
a
banks
(Continued from first page)
and
necessarily mean 100 8/32 for surance companies sold, but be¬
Victory 21/>s but which precludes cause the banking system bought."
bid of, say, 90 for long 2 Vz s, Mr. Parkinson .completely over¬
pro¬
-
limited.
Preferred Stocks
that the facts support either Mr.
Parkinson's reasoning or the role
money,
am
Stated
*
say
potential
$200 bil¬
a
2V2%, which does
ought
3!.
of
Depressed Markets tor High-Grade
Boy," I do not feel
and
then
support
•'
'
instruments
It is
singled out for the role
supply
Following this, Senator Sparkman
that
"
.
mone¬
A National
a
continue
*
orthodox
Increasing reserve
is a blunt instru¬
ment with which to do a difficult
and delicate job. More over it is
i,
.
'
economy-
requirements
thai
so
us
.
excessive credit expansion on the
banks and although we seem to
their
tinually backed the policy of sup¬
porting the 2^2% long-term rate."
disked "You believe that
—is
take the busi¬
'
•
not
to
large
non-bank
on
can
place the entire blame for
sion that the long-term rate
be supported at
Reserve
down
our
monetary control — open market
operations and the discount rate
compa¬
ness?"
inson. of the Equitable, seemingly
would
correct in my
diagnosis
of the situation and in
my conclu¬
testifying before
Banking Committee
Board and the Treasury have con¬
7
up
member
re¬
idle funds several billion
as
dollars
If I
it
excess
to
of,
power
leave
the
hold
in
Federal
I
long
the Committee
interest in accepting.
"the
give them
purchasing
which
Mr.
•'
in
would like
and
serves
to limit the amount of government
honds the Federal Reserve Board
crack
competitors
our
operating in the money mar¬
Under today's conditions I
cannot visualize a higher rate for
short-term money than for longterm money. I am inclined to go
along with Mr. Evans in his state¬
by
Banking
oLcthe
Letter, the reaction of the
banker might well be
"Why
inflationary aspects of definitely.
support policies are serves of
recognized no one in authority, I Banks would permit purchases of bank
credit. Moreover the heavy
think, would abandon support as some $40 billion government se¬
support purchases of recent weeks
a
policy.
Mr. McCabe told the curities.
Such purchases
would
the
by
into
within which
area
tary policy is free to operate. Use
practical
existed
far different set of fac¬
a
lending
frozen
limit the
hold¬
in
insurance
ket.
are
Support
at the special session of the
•Congress
while
of
conditions.
policies."
mony
Secretary
new
a
the
with
by the purposes and
powers of the public agencies that
have been created for handling
A
are
Secretary
and
Board, they would still be faced
-determined
our
par
by the policies and commitments
of
artificial inter-
an
break
a new Federal Re¬
Board would not be bound
serve
unrealistic and to
-accept the fact that
tinue
group of Kansas City bank¬
"The risks involved in per¬
feels it is best to peg prices above
par for the long-term issues." Al¬
'natural'
a
Mr.
member of the
Board recently
a
Reserve
wholeheartedly Treasury and
agree
As
too great to the nation's economy
and
for that reason
the
board
with Mr. Beardsley Ruml's state¬
ment that "it is sensible to dis¬
interest rate
Evans,
mitting Bonds to
too serious to contem¬
are
authorities.
a
ers
plications involved in the latter
policy
plate.
M.
Federal
which
had
conditions
such
the
be
Monetary Commission debt
management,
a
muddlng.'
high time I think that we through, and the risk that
join Mr. Parkinson, Mr. Aldrich false move may upset the wholes
on short-term
government secur¬
and Mr. Sproul in urging the cre-r apple cart, with the inevitable re¬
ities" might be the answer but ment that "I doubt that the shortation of a national monetary com¬ sult
that
we,
the
commercial
that "the 100 % guarantee of se¬ term rate will be increased
any mission to undertake a compre¬
bankers, will be the "goat" for-the
curities is such a landmark that further from this level."
hensive
mistakes that may be made.
review
of
our
whole
if you drop it even to 99
you
monetary and credit organization,
It is high time that we urge the
The New Cash Reserve
might participate a flood of sell¬
There can be no denying that with creation of a national
monetaryRequirements
ing." While it is true that a new
a
debt of some $250 billion all
commission to review our whole
Administration
n e xt
Faced with the problem of main¬ sorts of forms and
January
held by all sorts
monetary and credit organization*
would not necessarily be bound taining the long-term rate and of
investors, we are confronted
I think we owe it to our country
by the actions and statements of at the same time curbing tenden¬ with new and difficult
problems,
the present Administration, there cies toward excessive credit ex¬
The debt and the monetary ex¬ and to ourselves, as bankers, to
is no denying that a new Admin¬ pansion,
the
Federal
Reserve pansion which it has
produced are do so!
istration
would
be
confronted Board asked the special session of
with the same facts—facts which the Congress for
authority to in¬
have caused the present monetary crease member bank reserve re¬
authorities to support the long- quirements.
Although Mr. Park¬
$250 billion, in all sorts of forms
.held by all sorts of holders, and
with a high consumption, high
employment economy, in which
"there are already severe stresses
and strains, we can't treat the
^government security market as we
Instead of
might a $50 million issue of the term rate of 2 Vi %.
100 8/32 for Victory
OC Y Z Corporation."
2V2S; a new
Administration might decide on a
I think there can be no denying
somewhat lower price yet I doubt
that support of the market in and
that a new Administration will
of itself can be highly inflationabaiidon
the long-term rate of
cry.
But might it not be even
2%%7-In my opinion, a bid of 98
more inflationary if a decline in
for Victory 2V2S would not mean
cuoted prices brought on whole¬
abandonment
of
the
long-term
sale liquidation of E, F and G
rate of 21^%, and I am frank to
.Bonds and
marketable bonds held
when
bond
will
with it other rates have
and
been
lenders. As suggested in the Sep¬
tember issue of the National
City
tors
that
equal
an
but
government
part from
historically short-term rates often
have
exceeded
long-term rates
gest
roughly
individuals,
rate
nies without predetermined limit,
and
in
so
doing facilitate in¬
long-term
statement
its
ings, through purchases
of
per¬
with¬
rates
the
this
make
be
can
flate
may
limits
upper
which
jeopardizing
rate.
we
we
faced for many years to come! The
extent
to
which the
long-term
the
rediscount
is that
guess
nearing
Taft
banks,
'
.,
increase
the
amount b.y
over $20
billion by the Reserve Banks and
;
in
problems with which
suc¬
in ...its
..voluntary
program of restraining the undue
expansion of credit.
Already
increase
an
attained
cess
By the questionable solution .of
%% to the present raising member bank reserve re¬
level, an increase in the Certifi¬ quirements, the Federal Reserve
cate rate from % % to 1
% and a System is to be permitted to in¬
At present the long-term
rate of 2V2% is being maintained,
and on Aug. 9 Mr. Snyder stated
that "no change would be made
in the government's policy with
regard to the long-term bonds."
ported.
had
-Thursday, October 14, 1948
Bill rate from
we
mercial
■
CHRONICLE
retary of the Treasury for the
izing the long-term rate.
conclude that the present Admin¬
istration is pretty well wedded to
par for long 2M>s.
Even Senator
purposes are demand obligations.
About $65 billion is held by com¬
;
FINANCIAL
Problems in Federal Debt Management
-
|
&
Yield
103 11
104.17
4.40%
DifferentiaUy-^yy—7.+,1.00% .7+1.06/ 7
+
7 7.::.
Price
2.90%
.7.
.
r
.Change.'
Yield V
9T.01.
+
85.23
+
«
>■
Price
0.30% _—6,1®
0.80%
—18.9#
1.50%,,,^1.1478,7 + + 0.50%^—12.8d
j
168
Volume
Number 4742
COMMERCIAL
THE
,
.
most of the
ing interest in preferred^ over the
largest life insurancecompanies are domiciled—that a
ife insurance company may in¬
vest
in only 10%
of the stock
of any one company. Since the
unit
investments of
the
largest
last several years.
companies
probably
—
interested
more
in
production .of
and
[generous
income
in maintenance of prin¬
less
cipal than most other types of in¬
vestors—have also had
But of all
increas¬
an
types of institutional
investors, those that, by and large,
maintained the largest pro¬
have
portions of their portfolios in
preferred stocks have been the
capital stock fire and casualty in¬
surance
companies.
For
these
companies preferred stocks have a
substantial
tax
that
has
bonds
significance
advantage
assumed
participation to only the largest
preferred stock issues.- On the
other hand, there
are
countless
examples in which a single insur¬
ance
greater
At
present
tions ' having
$50,000, interest received
of
excess
of
a
Markets in the
Past Few Years
preferred stocks be¬
first time, legal
1945,
for
came,
investments
Since
insurance
continue to
pressed to find sufficient invest¬
come.1
1%
differential
gross
bond
and
to
taxes,
XVz%
1% %
the
In order to pro¬
need invest only 46V2%
in preferred stocks at
in bonds at 3%.
much
4.25%
differential
retained income, a
same
company
as
after
more
or
gross
to 2.20% or more.
cure
between
preferred stock yields
amounts
a
this feature, a
of
Because
as
But if
preferred stocks have an
impressive tax advantage over
bonds for fire and casualty
com¬
panies, they have other disad¬
vantages that have carried more
weight in the past few years.
Insurance
companies are
re¬
quired, for statement purposes,: to
evaluate preferred stock holdings
at
market
prices
of
as
certain
a
date, whereas they may evaluate
all bonds given at least the fourth
entire
middle of
Factors
Preferred
stock
common
firm
througn
a
stock
be
their
pear
that
ing
opportunities
may
either
in
the
rates
of
less wary
requiring valua¬
investments
of
market.
sented,
above-normal
of
in
Government
insurance
Loans,
companies
outlets.
were
War
were
Preferred
life
hard
stocks
and were bid up in
scarce,
price.
the
in
past
two
years
been
adversely affected by a
sharp contraction in demand, and
increase
contemporaneous
a
supply,
bringing
of
versal
the
in
complete
a
factors
that
considerable strength
re¬
led
to
in 1945 and
If
ing funds.
this
recent
among
investors
relatively
bonds.
to
acquire
of
Factors
contracting
be listed
Life
(1)
There
its
of
or
issues,
of
source
pressure
better
stock
common
demand
insurance
companies,
ample investment outlets in bonds
mortgages,
improved
at
S.
Insurance companies were
averse to accepting risks of fur¬
ther
in
decreases
pluses,
statutory
that
Surpluses of fire and
companies experienced
casualty
a
three-
term
(a)
maintaining
tained
one
From abnormally high loss
ratios.
At
what
value
will be
permitted to ascribe to it in their
statements, regardless of market
But in their holdings of preferred
stocks, no matter how high their
character,
their
surplus' on
statutory basis will fluctuate with
the wide and unpredictable mar¬
ket changes to which all fixedincome securities
(except shortterm)
are
subject. Inasmuch as
the surplus account is a strong
selling
point
this is
company,
the
for
they
insurance
an
factor that only
a
strongest companies
ford
overlook.
to
Life
can
af¬
insurance
companies, in which surplus tradi¬
tionally bears
vested
a
assets,
low ratio to in¬
are
particularly
sensitive to this.
Early in 1946 several insurance
associations
joined
together in
presenting
various ..Insur¬
Commissioners
ance
less
to the
onerous
a
plan
for
valuation of preferred
stocks
meeting certain high qual¬
ity
standards,
consisting
of
a
yearly adjustment in valuation by
only a part of the change in mar¬
ket price. Although the proposi¬
tion was clearly .and impressively
presented, the Commissioners to
this
date
it,
upon
whether
will
have
be
taken
is
and 'it
efforts
no
not
1946.
t;/
(3)
Because
therefore
come.
1946
about
1 Public
,
utility
operating
companies
from
the
14%
that they pay divi¬
dends
on
preferred stocks outstanding
prior to September, 1942, or issued to
replace
securities
outstanding
before
that
date.
The
corporate recipient of
dividends
on
such
issues, therefore, is
allowed
no
exemption from surtax, the
85%
exemption being applied only to
the 24% normal tax.
Thus the effective
allowed
to
the
exemption
extent
in
such cases is 17.6% (24% normal
15% of the dividend equals 3.6%,
14%
surtax).
Utility issues
for
"new money" provide full 85%
exemp-
rate
tax
on
plus
-
tion
of
dividends
to
the
corporate
ient.
recip¬
combination has
a
the
grown
high prices in 1946:
Increases
After corporGross
After
ation taxes
Gross
0.27%
0 17%
1.15%
0.79%
0.49%
3.95%
3.72%
0.61%
0.57%
1.90%
2.90%
2.43%
0.70%
0.53%
+ 0.43%
+ 0.36%
0.53%
+
?»»•'
■
• ■
tax-free
a
+ 0.42%
issues.
seasoned
V
in
$45,454
'
■
-
v'
+0.89%
'''
''
the
in¬
less).
Now
it
would
either
a
An examination of past market
movements, furthermore, demon¬
strates
to
the
reduction in exposure
risk provided by the
market
investment of half
in a
in
a
as
much money
high-grade preferred stock as
long-term bond, the balance
$i0O,O0O
($15,098
may
be imagined.
Approximate
After corporValue
price
Yield
Gross
2.89%
$2,987*
ation taxes
$78,000 Norfolk & Western
4s,
U.
128>/2
1996
S.
Treasury
2,000
$100,230
$1,796*
the
10132
49,505
1.74%
25'/2
-
The
If
rates
51,000
3.92
861*
2,000
will
that gross
be
nual income would be
of debt inadvisable. This has been
the
especially true
corporation taxes it would be in¬
utilities, for
which regulatory bodies prescribe
limits to the proportion of debt
in capitalization.
(2) Sales by insurance compa¬
among
in each
$2,420
ticularly toward the end of 1947.
unusually / large proportion
in preferred stocks; common
stocks
had
followed
a
creases
of
sideways
and
in¬
in dividends made holders
common
stocks
less
prone
to
following
term
PROM
& Wstn 4s
long-term bonds in the last two
has been relatively moder¬
ate, because of the determination
on
The
latter
are
they
siderable
provide
merit
a
re¬
with
from
the
con¬
stand¬
point of market protection—par¬
ticularly
for
taxable
insurance
companies.
Over
the
longer term, there is
that
a
less
possibility
a
valuation procedure
prescribed for insurance
onerous
be
may
com¬
holdings of high-grade pre¬
stocks. Of perhaps greater
importance, however, is the con¬
tingency that when the final post¬
pany
tax bill is written there may
end to double taxation of
an
dividends. If corporations were
granted tax exemption to the ex¬
tent that
ferred
they
dividends,
pay
stocks
would
attractive to those
to
be
pre¬
more
disinclined
now
buy them because corporation
income taxes
terest,
on
but
the
came
levied after in¬
are
before
dividends.
If,
other
hand, dividends be¬
exempt to the recipients,
then preferred stocks would have
tax-free status, and
compete,) with
taxTfree bonds. In either case,
is
manifest
that
the
market
it
for
preferred stocks would be greatly
A common argument in the
past
against institutional acquisition of
preferreds was that it was too
undue
this
market
disturbance.'
standpoint
being
now
demand—an
for
alone-^-the
greater than
unusual
buying
institutions
may
exist.
compares
PRESENT
J. Lau Jones
pfd.
J. ML Dain & Go.
MINNEAPOLIS, MINN.
VALUE
ham
At
J.
Lau
has
-
-
become
Wilasso-
Yearly Lows
$78,000 Norf.
& Wstn 4s
2,000 shs. Norf.
& Wst,n pfd.
+$11,500
—$1,560
+$1,000
+ 13,500
+2,245
+8,500
+ 6.435
+ 12,250
+3,900
+ 8,000
+4,680
+ 10,375
1943
' +3.120.
1942
—97
1941
+780
1946
+11,310
1945
1944
1940
■
I
+390
+7,250
r+ 10,000
—3,022
+5,500
+7,250
—3,217
1938
+3,500
—8.385
+ 1,500
+5,500
—10,725
—5,850
+750
—1,000
1936
+4.000
—13,650
—5,070
1
1937
—3,340
7,500
+
—3.510
______
+3,000
+8,750
—
1939
*
—0,000
—12,870
.
—
—3,510
+0,500
—10,530
—8,970
+3,000
—14,040
—1,500
1934
hardening of interest rates
ex¬
at
medium
high and low prices of the last
& Wstn
+$5,947
i__v—
table
1935
dispose of them.
bonds
munerative
opportunity
years, of $78,000 Norfolk
&
Western 4s and 2,000 shares Nor¬
folk & Western preferred:
Yearly Highs
$78,000 Norf.
2,000 shs. Norf.
1947
stocks.
16
At
nies with small surpluses, to fore¬
any further depreciation inr
statutory valuations.
(3) Heavy tax-loss selling, par¬
at
creased by $624, or almost 35%.
stall
reasonable to
a
the variations from present values,
practically
alternative; after
CHANGE
bonds
unusually wide
yield differentials from long-term
bonds; in conjunction with short-
now
The
an¬
particularly where policy or pre¬
vious borrowings made incurment
same
long-term
available
now
supply
1,886
$2,861
$100,505
noted
Outlook
on
that
From
534*
"'Amortized.
It will be
$8,770 at
continue to be maintained at low
the
(1) Flotations of preferreds by
corporations to provide funds for
expansion
and
modernization,
years,
difficult to buy large blocks with-*
shares Norfolk & Western
preferred
sixteen
highs and $10,311 at the lows.
out
2s
12-15-54-52
4s
sixteen
broadened.
Annual Income
present
Cons.
the
be
require
$64,948
investment
in Treasury
2V2s, but only $41,153 in the com¬
bination, or $23,795 less.
or
combination
in
market
war
■
■*
corporate investor at 1946
being placed in short-term securirhighs could have created $1,000 in
ties:
For example, the following
income
after
tax
by investing
$72,993 in Treasury 2V2s, or $57,- .alternative investments of about
in
Western
points
ferred
The
895
9%
This would amount to about
over
taxes
1.85%
equal amounts
Governments and pre¬
5-year
4%
known
limiting
yield advantage
3.15%
—0.01%
highs
Treasury 2J/2S,
$49,000
of:
The
surtax
dividend in¬
;
pattern during the year,
factor
in
Meanwhile, the supply of pre¬
ferred stocks increased, because
was
the
market for preferred stocks is the
ruling in New York State—where
are
interested
not
were
the tax advantage of
action
along these lines
of
underwriting
losses in 1946 and 1947, many fire
and casualty insurance companies
had no income tax liability, and
An ;
revived.
Another
(c) From the break in common
stock prices in the fall of
the
re¬
following
0.66 %
.
foretell
The
Recent Yields
ation taxes
vestor, in order to provide $1,000
annual income, would have had to
of
how
of such
since
increasing
or
income.
shows
ferreds.
At present, he would de¬
(b) From vastly expanded unrive $1,000 income by investment
derwritings,
necessitating
the
establishment
of
in¬ of $40,323 in Treasury 2 V2S, and of
creased unearned premium only $34,483 in the combination
$5,880 (or 14.%%). less.
reserves.
becomes impaired they can
bond
security for reserves, while
3.34 %
on
&
preferred
provide short-
cases
1.06%
:
a
com¬
and in many
1.54 •%
vrr.jj t ~■■
in
on
still
Computed—preferreds
invest
barreled attack:
best
rating by rating agencies at
cost, modified by amortization of
discount or premium. Thus, they
know that unless the security of a
*
the
is
$78,000 bonds. The relaadvantage of 2,000
shares of preferred over
$78,000
bonds,
however, has
averaged,
i:ive
2.20 %
Difference
sur¬
to the requirement
stocks be valued at market,
about
$7,400
2.48%
preferreds*__
considered
Norfolk
years.
recom¬
1.37%
Average
due
insurance
to to H-*
5-Yr. taxable governm'ts*
High-grade
of
case
course,
stabilizing influence
extended to high-grade
yields.
(2)
by
Treasury 2%s,
12-15-72-67
be
of
seems
Yields at 1946 Highs
After corporU.
to
This,
pect
market
Gross
of premium to
similar treatment
no
levels, it
effect.
same
bonds,
gate exposure to market decline
if interest rates harden
further,
surpluses.
on
sure, the comparison of
has been made by
apply¬
would be amortized down in
price
long-term
taxable
have
present
company may decrease its aggre¬
many
preferred
alleviating
course,
For
of
of
amortization
nrim.
advanced
stocks, rather
bonds, since
taxes tend to minimize the
yield
spread between short- and longterm bonds, and to widen it be¬
tween long-term bonds and
pre¬
ferreds, By such a combination, a
cycle
of abnormally high losses for fire
and casualty companies may have
run
those
to
89.5%
parisons of market prices over a
period of time. From their present
bonds and preferred
than
in long-term
signs that the
are
also
value,
bonds
be
factor
mend investment for fixed income
in
a
combination of short-term
market support.
or
follows:
as
for the first time in years, found
and
maturity
have
the
have'aver¬
present
the
being feasible in the
short-
on
companies there is much to
been
countering the reluctance of
bonds
but
preferred.
important
yields
of
the
well. In
as
is
it
its
of
those
ing
Reserve
connection,
preferred
99.6%
To
in
to remember that
sink¬
or
The latter have
common
A
Federal
than
yearly low-prices of Norfolk
income
stock.
common
lower
27
value.
ratios, and
preferred stock market
ap¬
return,
loss
compen¬
support is
stabilizing the longterm
bond
market, .its
effects
should inevitably reach into the
pre¬
form
purchase
could have the
the early months of 1946.
may
of
be
been
Western
aged
companies have rebuilt
capital accounts by sale of
successful
may
would
&
many
several
additional
stocks because of their absence of
But
has
the form
it
But
nearly to
more
for abnormal
their
result unusual buy¬
as a
tion at market. With the cessation
ment
sate
having
revival in
any
The
averaged
numerous,
tendency to limit
has
(155g)
present price in 9 of the 16 years.
creased,
market.
flotations
1946, strong statu¬
made them
hand,
in¬
while
Permanent?
tory surpluses of many insurance
companies
could
of
types of insurance have been in¬
term
important
preferred stock divi¬
dends pays a tax thereon equiva¬
lent to but 5.7% (38% tax on 15%
of the dividend), compared to a
full 33% on taxable interest in¬
receiving
the
fact
sues.
life
the
continued
market
the
on
several
for
in
companies
tax of
24%
and
unless
specifically exempted (as in the
case of partially tax-free govern¬
ment and fully-exempt municipal
bonds). Dividend income, how¬
ever, is 85% exempt to the cor¬
porate recipient.
This means that a corporation
to full normal
surtax of 14%
subject
the
issues this year
"sour." In this con¬
These
both
revival
the rates charged for
it will henceforth participate only
in negotiated preferred stock is¬
Are
of
a
more,
new
been
to
—■ - • •
in
the
states.
is
have
lead
terest
Indeed, one of the leading under¬
writing firms has indicated that
Factors Affecting
In
rates for corpora¬
taxable income in
that several
by
pressure
company.
,
intensified
indebtedness
bonded
small
rates
been
combination
quickly
depression in prices of preferreds
has
.'"-"V v
"
preferred stocks on the
stocks. The relative- part of such
companies. Further¬
for preferred
has purcnased ine
company
A
nection, there is ample evidence
to support the view that competi¬
tive bidding is ill-adapted to pre¬
ferred stock issues, often leading
to
over-pricing and subsequent
entire
increased.
have
so
over
income tax
as
substantial, this
the effect of restricting their
has
'FINANCIAL, CHRONICLE
'trnsettlement in any market often
breeds further unsettlement. Such
has been the case in the market
.
are
&
—13,650
—750
—23,205
—10,000
1.933
—21.840
—7,250
—32,370
—14,000
—22,230
—10j250
—38,805
—18,500
L
1932
+1,500
years
of
the
peg
rate
Federal
Reserve
Bank
to
long-term governments at
slightly below 2y2%. This
direct
support has
naturally lent
stability to the mar¬
ket
for
high-grade
corporate
bonds as well, but its influence is
considerable
not
yet apparent in the preferred
stock market.
It is
a
well-established fact that
16-Year
At
Average
every
-
—$3,278
point
noted
+
above,
shares Norfolk & Western
had a relationship to
present market value superior to
2,000
preferred
that of
$78,000 Norfolk & Western
4s, the market
smaller
ferred
advantage
investment
in
being greatest in
of
the
the
pre¬
poor mar¬
kets; It is emblematic of the "fall
$5,492
from
-$10,524
grace"
ferreds
answer
(and
of
-$213
high-grade
somewhat
an
depreciation in preferreds) that in
each of the last 13 years Norfolk
&
Western preferred has at
time
sold higher than
some
its present
quotation. The high price of Norfolk
&
Western
4s,
on
Wm. J. Lau
pre¬
of
to those who fear market
ciated
with
Rand
Tower,
J.
M.
Dain
members
&
of
Co.,
the
Minneapolis-St. Paul Stock Ex~change and the Chicago Stock
Exchange, in their municipal de¬
partment.
Mr. Lau was formerly
manager of
the trading depart-
the other ment of C.
S. Ashmun Co.
28
(1560)
THE
COMMERCIAL
FINANCIAL
&
CHRONICLE
Thursday, October 14, 1948
prices, the business of $8 billion without too
remedy, and the only remedy that is constructive, is the one many gifts or loans.
provided by nature — the shifting of effort from unprofit¬
Exchange Devaluation Fears 1
able to more profitable spheres of business
In addition to actual shortages
activity. What
present policy accomplishes in one way or another is to of United States dollars in vari¬
ous
countries of the world, the
induce larger production of certain things than the world
instability of world currencies and
wants or at any rate is prepared to pay for.
Farmers, and the fear on the part of the Amer¬
farm laborers, are thus kept at pursuits which do not
duly ican exporter that currencies will
be devalued while dollar drafts
add to the well-being of the world.
downward and remain down in relation to other
ypmAs We See ItS§2§
(Continued from first page)
J
v
(
cultural and other producers in the nation. This "parity"
price, or rather this whole set of "parity" prices, soon
came
of
to be
accepted by the New Deal
of the economic
measure
managers as a
rights of the farmers.
sort
Gen-
erally speaking, the relationship of prices thus envisaged
was not realized prior to the outbreak of World War II
|
despite the efforts of the Roosevelt regime. When war
,
Here is
and the attendant need for greatly en¬
a system known as
"support" operations was developed.
It consisted of
a sort of loose guarantee that the farmer would receive
came
us,
upon
larged quantities of farm products,
a
and programs are
large part of "parity" (usually about 90%) for most of
his
Now
Real Problem
a
have until recently,
Government of the
necessity of taking action under this arrangement, although
by indirection at one time or another prior to the formaliza¬
tion of the supportprogram itdid in fact employ a type of
support operations, and in certain spectacular instances,
notably potatoes and eggs, various means have been em¬
ployed from time to time since the war to bolster prices.
But the large crop yields this year and the rising costs and
prices in non-agricultural industries have succeeded in rais¬
ing "parity" levels and "support" levels of prices at the same
time that the market prices of a number of the major farm
crops have been declining substantially.
result,
of them, is that the Federal
or one
Government is faced with the
of large support operations.
necessity,
or
thinks it is,
Several of the major
crops
below "support" levels and more are below
"parity."
Meanwhile, uncertainty about the future of farm prod¬
ucts, coupled with a definitely rising tendency in many
manufactured goods due to the effect of "third round"
increases, strongly suggests that this task of "sup¬
porting" farm markets is not likely to be a strictly tem¬
porary one. This "necessity" is partly political, of course,
wage
I'
but for the remainder of this year has also the support
j
of
sort of promise made the farmer for the duration
a
of the
and
war
Export sales on
generally are
made in United States dollars, and
it is the foreign importer's obli¬
gation to pay dollars.
In the case
of
two
elected Congress
!
knows, of
;
commitments of
thereafter.
years
will do next
but
course,
the law
as
sort
one
year
or
What the newly
no one
now
at this time
stands support
another extend far beyond
as we
come
when
Thinking
a
question naturally arises as.
protective measures can
by the American ex¬
what
taken
porter
is
risks
which
circumstances*
such
under
This
International Trade
tion
with
tries.
hard
You
currency
coun¬
going to hear that
are
term, "hard currency,"
commercial
the
of
one
must
assumed
be
on a num¬
ternational Bank for Reconstruc¬
tion and Development (known as
World
the
Bank), the Interna¬
Monetary Fund (known as
Fund),
the Export-Import
the
American
and
exporter
financial
when
the
in
conditions
various countries of the world, by
selling on
sight basis rather than
a
ber of occasions in discussions and
tional
articles in the future and I think
it might be well for me to tell
ing the collecting bank in the for¬
eign country obtain from the
and, to a certain extent, through drawee a guarantee on exchange
the Economic Cooperation Admin¬ differences; that is, between the
time the local currency is depos¬
istration (Marshall Plan).
ited
as
a
provisional payment
Were it not for the existence
against the collection and the ac¬
of these agencies, the volume of
tual time of the remittance of the
our exports in the postwar period
dollars.
would be substantially less.
It
This threat of devaluation of
loans
and
credits are properly
course is serious to the American
used, and by that I mean if they
exporter.
We have already seen
are used for the extension and im¬
it happen in the Argentine, in
provement of transportation and
Mexico, in Uruguay, in a back¬
industry, for the stabilization of
handed way in Colombia, and in
currency, for the purchase of ma¬
Peru.
Of course, we have also
terials essential to the economy
seen
devaluation of currency in
of a particular country, normally
France and Italy.
<
they should improve its economy
This instability of world cur¬
and strengthen its position in
rencies is also a great deterrent to
world trade.
understanding of what a
our
you
hard currency is.
The actual meaning of interpre¬
tation of the term "hard currency"
has
changed materially in this
postwar period. Before the war, a
hard currency;was defined briefly
as
a
currency
freely exchangeable
for
gold on demand and freely
salable in the exchange market
for
other
world
currencies.
At
the
moment, there are practically
currencies
be
in
the
world
that
exchanged for
tals of this whole system much more careful and
order to meet the needs of
pened many times in the past and
suffered
severe
by
he
ships abroad on any basis involv¬
ing the extension of credit. And,
(Continued from page 17)
while it cannot be wholly elimi¬
and dollar exchange
balance, or greater part of the loans and cred* nated, it can be minimized by
unless
they
have
a
favorable its available today are extended checking
credits
carefully,
by
yearly balance of payments posi¬ through such agencies as the In¬ keeping informed on exchange
gold; and
this applies, of course, to our own
country.
As a consequence, the
should
own
exporters have
losses.
® ■
The
The
Bank
(known
as
Ex-Im.
hungry and impoverished world.
The number of hard currencies
Of course, the way to assure the world of this volume of existing
in
limited to
the
today
world
few countries such
is
the
in
of
form
gifts
time-draft basis, and by hav¬
on a
Bank)
give the fundamen¬ definition
has narrowed and .we
dispassion¬ now consider a hard currency as
ate thought than we have ever been inclined to
give it in one that can be freely sold in the
During the period of the war,
the past. The tendency at the moment, in the midst of a exchange market, without restric¬
we
disbursed abroad some bil¬
national political election, is to take the easy way of assert¬ tion, for other world currencies. lions of dollars—some I would
say
Hard Currencies
discreetly and some indiscreetly—
ing that production of farm products must be maintained in
we
importer's
be
can
Time for Realistic
however,
financial position
country may be so
seriously affected that he may be
unable to deposit additional local
currency to purchase his dollars;
or, he may not consider it his obli¬
gation to do so.
This has hap¬
have been doing.
The New Pattern of
most
devaluation,
severe
to
no
the end of this year.
The time has
heritage
our
basis
within his
operations in the securities markets, the field of labor
relations, the money market, and a dozen others. We are
really well endowed by nature, as we are so often told. S
Historically we have made good use of what nature pro¬
vided us, but we can not afford to continue
indefinitely
to waste
draft
the
worse.
multitude of controls and regulations which now
govern
War conditions and postwar scarcity
for the most part, relieved the Federal
are
ing foreign sales.
a
We find similar interferences with natural forces in the
:
The net
even
foreign buyers,
on
also has had the effect of decreas¬
determined also by the vote-getting
qualities of actions taken, the situation is
products.
outstanding
are
situation which is
quite typical of all the
placed upon nature and natural forces in the
economic world by those who set themselves
up, with
the taxpayers' funds, to decide what the people want or
ought to have. When, as is usually the case, policies
a
restraints
and
loans.
whether we can continue to
stand the strain of gifts and loans
But
world
trade
leads to
and
an
un¬
the part of many
accept payments for
own exports to another for¬
country except in United
willingness
on
countries to
their
eign
States
tween
Thus,
dollars.
trade
be¬
foreign countries is stifled
by reason of lack of dollar ex¬
products, at least some of which it does not want, is to con¬ the
over a further period of years, is
United
States, Switzerland,
change or it is reduced to what¬
tinue to pay the farmer
questionable.
While it is appre¬ ever
large bonuses to produce them. This, Mexico, Cuba, Venezuela, the
limited
volume
may ,® be
ciated that our action from an
we repeat, is the
arrived at through bilateral trad¬
campaign "line" of virtually all candidates Philippine Islands, and there may
a
as
for office. Since it is the campaign preachment, the
problem perhaps be one or two more in
of considering the matter with a fresh and more realistic that category.
Certain steps may be taken for
mind after the elections will be the more difficult.
the
Yet there must be
■
;
where.
The
whole
an
idea
end to this sort of
is
full
of
thing
infirmities
some-
and
the
execution productive of
exceedingly expensive anom¬
alies, absurdities and dangers. The fundamental notion
that government is under any sort of
obligation to re¬
store
and maintain
indefinitely the price relationships
prior
anything
% in the economic system which is
historically forever
changing it is the relationship of one price to another or
one set of
prices to another. It is nature's way, or one
of nature's ways, of keeping the economic
system pro¬
ducing what people want and are willing to pay for. It
likewise reflects changes in tastes, requirements and
costs of production. ®
between farm and other commodities which existed
to World War I is absurd on its face. If there is
A
Losing Fight
Efforts to prevent these normal,
sary
changes
as
time
passes are
Those reformers who undertake it
often ascribe to others, that of
are
even
neces¬
guilty of the sin they
trying to turn the hands of
stopping the hands of the clock alto¬
gether. But massive efforts to accomplish this impossible
feat of necessity set up
rigidities in the economic system
the clock back
—
or
of
ation
the
econo¬
dollar
of
exchange.
For
example, "loans or credits of one
kind or another—whether they be
extended through private or gov¬
ernmental channels—play an im¬
part in world economy
international trade.
But
portant
and
in
if these loans and credits are im¬
properly used within the foreign
country, they become an addi¬
tional strain on foreign exchange
and an additional bur¬
country to provide
resources,
den
the
to
exchange for amortization or pay¬
ment of interest on the
International
Loan
debt.
Agencies;
Some loans and investments are
and
doomed to ultimate failure.
of
mies of countries and for the cre¬
made
-
healthful,
rehabilitation
through
those
channels
private
interna¬
with
banks
tional operations also make a sub¬
stantial contribution through the
extension of lines of credit to for¬
eign banks throughout the world.
In
fact,
facilities
abroad to obtain
would
were
be
it
open
a
to buyers
letter of credit
substantially
not
for
which
the
reduced
fact, that
economic
viewpoint
vated by
a
ticipating
tate
and
moti¬
was
desire to enable par¬
countries to rehabili¬
re-establish
themselves
ing agreements.
is
fully
•
States Government
The United
aware
this
of
drag
on
in view of
the important part that the Eco¬
the time is coming when these
nomic
Cooperation Administra¬
nations must rise or fall, depend¬
tion aid will play in export trade
ing on their own efforts.
and world recovery, I would like
We in
the United States can
to read just a few sentences from
assist in this world picture by im¬
the requirements of ECA, which I
porting goods and services when¬ believe are very pertinent.
®
ever
and
wherever possible.
This states in part: "The exten¬
There must be many commodities
sion
of aid
to
Europe by the
that we could import to the ad¬
United States is made contingent
vantage of the country as a whole
upon continuous effort of the par¬
and to the advantage and benefit
of
the
individual consumer.
I ticipating European countries to
establish a
joint recovery pro¬
believe we could do that without
in the world picture, nevertheless
world
recovery,
and
,
harming
our own economy.
Sub¬
stantial
purchases by us of raw
materials and goods from foreign
countries
needed
would
much-
create
dollar
exchange and en¬
able them to reduce their borrow¬
ings, to service existing debt and
pay for their imports from
the
United States.
cial
the
volume
out
of
this
of
in
our
prewar years,
export
trade,
with
minor differences between
and
trade
country will parallel
import
our
as
imports..
some
I
and
based
monetary measures nec¬
establish
its
stabilize
to
essary
or
maintain
a
currency,',
valid rate'
exchange, and generally to re¬
of
store
or
maintain
confidence
ira
monetary system; cooperating:
its
with other
increase
and
participating countries?
interchange
services
pating
among
countries,
barriers
to
trade
of
goods
partici¬
to reduce
the
and
among
them¬
selves and other other countries.'*
Under
exports
In other words,
is
program
each country taking finan¬
upon
to
Eventually,
This
gram.
the
Economic
Coopera¬
tion Administration plan, 20% of
the funds® available during any
can not fail to
prevent it from functioning as it should; American banks still are willing feel that with an import business
When either the demand for farm
products declines, or the to extend credit to foreign banks of $6 billion to this country, we
current year must be used as loans
production of farm products
the balance of
so
increases that, prices turn throughout
-
the
world.• The could
easily
support- an
export
to
participating ; countries.
For
80%, the ECA ap-
Volume'168
the
proves
Number 4742
:
purchase
of
be
considered
individual
as
grant
a
purchasers
to
within
the
Country.
Individual purchasers must pay
for their imports in the
currency
of
the
to
for all
country,
nanced
goods fi¬
the nation
by ECA, and
which
must
the
commodity is sent
deposit
commensurate
a
amount of local currency
an
account to be used
funds in
for
the
recovery of the country under the
direction of ECA.
This
the
requirement
result
of
debt in the
and
should
reducing
COMMERCIAL
&
FINANCIAL
CHRONICLE
spe¬
cific commodities to participating
countries, but in no sense is this
to
THE
have
internal
participating countries
to
the
list
Leading grain markets
for
the sharp
preferred treatment, chances of "good" steel
distribution faded.
The capricious attitude of some Congressmen
on
allocations, first seeming to want a voluntary setup and then
switching to stern pronouncements that maybe government controls
were the answer followed
by championing plans to return steel divid¬
ing to the industry, have left steel executives in a quandry.
The cost of
some
producers
are now
they
Defense
quotas
requirements
aside
set
for this
orders has quickened.
reaching
In
use.
Many in the trade fear that the crop is
mills
are
not
the
tempo of
up
world confidence in its
rency.
Position
cur¬
own
V;;-
.'•>
•
a narrow range.
Interest in the cash grain
quite slow despite continued heavy purchasing by the govern¬
Demand for flour was spotty with prices up slightly for the
week. Lard prices were fairly firm, but
hog quotations broke sharply
such
to the lowest level since last
the
of Great Britain
foe
world
picture
minimized.
should
Prior
the
various
countries
the
around
world) absorbed a substantial part
our export business; in
fact, in
of
the years
1919 to 1939, I believe
figures show that they im¬
ported about 41% of our total ex¬
the
ports.
As
V,.'V'V;" ■;.'';'./'■
result of the
impact of the
war, Britain is finding it very
difficult to regain her important
a
position in world trade and to
store
her
balance
equilibrium.
ment
the
state¬
made in many quarters
Great
Britain was headed
national
within recent
the
of
payments
1947,
bankruptcy; but
months the position
has
materially
it is hoped that
conditions will improve to a point
country
improved,
where
and
they can regain their
viously
important
pre¬
in
position
world trade, at which time export
and
restrictions
import
be
may
relaxed and trade with the United
States
increased.
Perhaps I should also mention
here, in passing, the effect on in¬
ternational
trade
of
the
high
prices that exist in this country.
The high prices here have mate¬
rially reduced
dollar
the
to
the value
the
of
one
of
the
important factors in the loan
of
$3%
billion
Kingdom;
is,
that
they had to
the
to
the
United
fact
that
such high prices
pay
unhappy
of
state
politics
few years should be mentioned as
one
of the factors that has slowed
world
rehabilitation
placed
damper
a
trade.
Had
World
international
on
not
it
obstructive
for
been
tactics
trade
has
and
of
Russia?
have
would
the^
since May
two-front
1,732,200 tons
a
month
ago,
old capacity one year ago and
in
1940, highest
ELECTRIC
IN
war
and
entries for the
15, 1933, when the
ing
the steel operating
prewar
OUTPUT
1,693,900 tons,
or
1,281,210 tons for the
96.8% of the
week
Demand for cotton textiles remained rather slow.
gray goods constructions showed further
class A print cloths showed improvement.
year.
SHOWS
SUBSTANTIAL RECOVERY
While
LATEST WEEK
light
power industry for the week ended Oct. 9, was 5,481,632,000
kwh., according to the Edison Electric Institute. This was an increase
of 33,078,000 kwh. above output in the
preceeding week, and 523,570,000 kwh., or 10.6% higher than the figure reported for the week
ended Oct. 11, 1947.
It was also 986,412,000 kwh. in excess oi the
output reported for the corresponding period two years ago.
908.581
This
revenue
freight for
the week ended Oct.
cars,
was
an
increase of 610
and
trucks in the United
States and
Canada
dropped to 119,490 units from 121,475 (revised) units the previous
week, according to "Ward's Automotive Reports." '
Losses last week by Ford and General Motors divisions more
•
week's output consisted of 89,213 cars and 24,087 trucks
the United. States and 4,005 cars and 2,185 trucks made in
in
secret,
are
and
industrial
Bias
just
gone
the
chaotic.
remember
that
the
that
through
disastrous and devastating war in
the
history
of
It is
the world.
only natural to expect that
turn to
that
we
re¬
normalcy will be slow and
discouraging.
while
a
However,
I
feel
are
making progress, and
many
knotty problems still
remain to be solved before world
peace
is attained,
world gets back
trading
basis, I
and before the
on
a
multilateral
believe
we
beaded in the right direction.
are
demand for most foods increased slightly dur¬
a fractional increase in the volume of meat
of the country
cuts.
following
numerous
of price
slightly, but demand for
dairy products decreased moderately.
The volume of canned and
frozen foods rose fractionally in
many localities.
in
volume
well.
consumer
durable
goods
showed
moderate
a
Curtains, draperies and other home furnishings
and hardware volume was steady at a high
Furniture
Failures with liabilities of
with
96
in
liabilities
the
more
than
previous week and 56
exceeding
$100,000
a
numbered
$5,000 totaled 82 compared
year ago.
Those involving
11.
Failures under $5,000
increased to 25 and compared with 16 last week and six in the
cor¬
consumer demand for washers,
ranges and small electrical
appliances reported to have declined in some sections of the country.
demand
Retail
trade
casualties increased
were
down
In all other
and
were
almost
one-half
a
high level.
The
pipe, carpenters' tools and other steel items
re¬
high.
period ended
last
1%
to
5%
on
Wednesday
above that
of
a
year ago.
Regional estimates exceeded those of a year ago by the fol¬
lowing percentages: New England 2 to 6, East and Middle West
1 to 5, South 3 to 7, Northwest 4 to 8, Southwest and Pacific Coast
the
industry and trade groups failures
slightly.
•0 to 4.
The
Pacific States reported 40 business
area
in six years and nearly twice as
casualties, the most in
many
as
in
any
other
Total wholesale order volume
it
continued
to
rose slightly
during the week and
fractionally above that of the comparable 1947
be
week.
WHOLESALE FOOD PRICE INDEX AT LOWEST LEVEL
IN FOURTEEN MONTHS
Continued weakness in
foods, particularly meats and live¬
a further sharp decline in the Dun & Bradstreet
price index.
Down 19 cents in the week, the index
some
stock, resulted in
wholesale food
steel
Retail volume for the country in the
week was estimated to be from
of
responding week of 1947.
week's total failures.
interest in television sets continued at
for
mained very
Many retailers continued to re-order for nearby and prompt
deliveries of fall and winter merchandise in efforts to replenish cur¬
rent
to
the most
in¬
consumer
Fresh fruit and vegetable volume rose
Consumer
we
world
The dollar volume of
consumption in many parts
Inc. reports. Casualties exceeded those in the comparable weeks of
1947 and 1946 but were less than one-half the number in
prewar 1939.
world
But
consumer
heavy fall and winter apparel were in large
Consumer interest in women's furs continued
recent announcements
sold
failures
favorable
a
level with
been
course,
throughout
extremely
must
of
consumer
ing the week with
dipped to 107 in the week
preceding week, Dun & Bradstreet,
this
no
:The
Retail
Commercial
in
winter merchandise and in
generally limited, but women's untrimmed fitted coats and
fur-trimmed coats remained popular.
Zip-in lined coats were well
received as was true of women's tailored
gabardine suits.
Men's
apparel and furnishings were frequently requested.
increase last week.
BUSINESS FAILURES TURN LOWER
and
be
Canada.
region.
is
Women's and men's
stated.
This
consumption.
country in the period ended
reflected
was
chandise remained evident.
Chrysler, Packard, Hudson and Willys-Overland,
Output in the similar period a year ago was 98,978 units, and
79,065 units in the like period of 1941.
made
Wednesday of last week
buying
slightly exceeded that of the preceding week and was moderately
above that of the corresponding week a
year ago, Dun & Bradstreet,
Inc., reports in its current review of trade.
While there was some
continued price resistance, consumer interest in good
quality mer¬
to
GENERAL MOTORS LOSSES
cars
Cooler weather in many parts of the
on
demand the past week.
AUTO OUTPUT ADVERSELY AFFECTED BY FORD AND
Production of
trading in the Boston
RETAIL AND WHOLESALE TRADE MODERATELY HIGHER FOR
WEEK AND YEAR
creased food
2, 1948,
according to the Association of American Rail¬
cars, or 0.1% above the preceding
week this year.
However, it represented a decrease of 33,874 cars,
or 3.6%
under the corresponding week in 1947, but an increase of
1,413 cars, or 0.2% above the similar period in 1946. ;
totaled
roads.
prices continued nominally firm,
quiet. Mills appeared to be well covered and
continued to maintain' a waiting attitude.
Trading in the
Australian wool auctions was erratic, with
prices again slightly easier.
dealers
J.response to promotions of fall
CAR LOADINGS MODERATELY IMPROVED IN WEEK
of
Although some
easiness, the undertone in
wool market remained
and
Loadings
a
average
The amount of electrical energy, distributed by the electric
farther along the road to recovery.
It
The
ago,
a
was 99.2%.
A month ago the indicated rate was 96.1%.
This week's operating rate is equivalent to 1,775,400 tons of
steel ingots and castings compared to 1,757,400 tons one week
snuch farther advanced and much
conditions
the continued heavy movement into the govern¬
latest report by the CCC showed total loan
was
stock.
The cotton parity price for mid-September declined
slightly
to 31.00 cents per pound, from 31.12 a month
ago.
This marked
the first drop in the parity price level since last
February.
at the highest rate
engaged in
was
ended October 7 from 112 in the
throughout the world in the las
loan
rate
nation
for goods and materials imported
from the United States.
ment
season through Sept. 23 of
348,825 bales, thus indicat¬
movement into the loan during the week of 133,852 bales.
Thfe
compared with entries of 101,241 bales during the preceding week.
scheduled
are
"Ward's"
was
,:
ing influence
ity for the week beginning Oct. 11, 1948, representing a rise from
the preceding week of 1.0 points, or 0.1%. Operations this week
that they could import
That
/
Trading volume last week reached the highest level of the season,
totaling 254,600 bales in the ten spot markets, as against 215,800
bales the previous week, and 324,700 bales in the
corresponding week
a year
ago.
Foreign inquiries were substantial; France was reported
seeking 100,000 bales of the staple for delivery this month. A steady¬
'
than offset gains by
relatively less.
week.
are
on Monday
operating rate of steel companies having 94% of
steel-making capacity of the industry will he 98.5% of capac-
the
importing countries, in
sense
The
Detroit automakers
of this week the
re¬
was
that
for
In
of
1949.
somewhat smaller than
steady during the past week.^
Daily fluctuations held within a narrow range with both the spot'
and nearby futures contracts
scoring slight net advances for the
chance that quotas will be any bigger in the first quarter
The reverse may be true, "The Iron Age" concludes. As a
no
The American Iron and Steel Institute announced
not
War II, the British Empire (and
I say British Empire, comprising
Steers held firm with marketings
week ago or a year ago.
Domestic cotton markets remained
set up.
World
to
a
concentrating heavily on con¬
version plans—both those in effect and any new ones that can be
The importance of Great Britain
in
of
July under the impact of heavy market
receipts.
so
.
consequence
,
after har¬
Wheat prices held in
the
to
There is
to restore
soon
was
ing all steps
necessary
huge that farmers
ment.
But with most steel
been used up
so
will be forced to sell large
quantities of the grain
vest, owing to lack of storage room.
concerns only 10% to 50%
far. More tonnage for military
orders is expected before the end of the fourth quarter.
There is every indication that defense steel and other essential
programs will run smack into domestic steel orders early next year.
of the quotas have
prices
corn
With harvesting just
getting under way in many areas, country
offerings of both new and old crop corn have been relatively light.
charges on hot-rolled
a subsidiary of National
weeks
steel
recent
Cash
year.
Corn futures hit new seasonal lows early in
the week but rallied somewhat in late
dealings.
on these products and
akin to those of National Steel Corp.,
likely to revise their extra
sheet and strip too. Weirton Steel
Corp., also
Steel, made similar advances.
*
held relatively steady.
busily studying their costs
also
are
week ago.
a
from the previous
week, but it was less than half the 298,187 bushela
sold during the corresponding period of last
jump with
Great Lakes Steel Corp., advancing the cost of hot-rolled sheets
and strip by a figure estimated at between $13 and $15 a ton
by in¬
creases in extra charges with no change in base
prices.
Other steel
if they come up with figures
comparatively steady following
were
declines recorded
Trading volume in grain futures on the Chicago Board of Trade
totaled 104,963,000 bushels last week.
This was about unchanged
automobile steel has taken another
balancing budgets, by encouraging
industry and exports, and by tak¬
^
showed a further moderate drop in the latest period.
figure fell to 271.37 on Oct. 5, from 273.88 a week pre¬
vious, and 281.85 on the corresponding date a year ago.
The index
(Continued from page 5)
strengthening currencies. But
cannot do the whole job in this
country.
Each
country
should
take steps to help itself by reduc¬
ing government expenditures, by
we
street, Inc.,
The State of Trade and Industry
added
(1561)
for Oct. 5 stood at $-3.51, or a drop of 2.8% from $6.70 a week ago.
was the lowest the index has been since July
22, 1947, when it
This
$6.48.
It represented a total decline of 44 cents, or 6.3%, from
$6.95 recorded three weeks ago on Sept. 14.
Compared with the $6.83
for the corresponding date a year ago, the current figure shows a
was
decrease of 4.7%.
Influential in this week's decline were lower prices for corn,
oats, barley, beef, hams, bellies, lard, cheese, sugar, cottonseed oil,
potatoes, rice, hogs and lambs.
Moving upward during the week
were flour, wheat, rye, butter, cocoa, raisins and steers.
COMMODITY PRICE INDEX CONTINUES MODERATELY LOWER
TREND IN LATEST WEEK
Continuing the downward movement of the past few weeks, the
daily wholesale Commodity'price index, compiled by Dun & Brad¬
inventories.
The buyer demand was centered largely in medium
moderately priced merchandise.
Department store sales on a country wide basis, as taken
the Federal Reserve Board's index for the week ended Oct. 2,
from
1948,
change from the like period of last year.
It compared,
however, with an increase of 1% in the preceding week. For the
four weeks ended Oct. 2, 1948, sales increased by 3% and for the
year to date by 7%.
showed
no
Retail trade in New York the past week suffered
tion in sales volume
as
a
a
contrac¬
result of the religious holidays and poor
weather conditions.
According
sales
1948,
decreased
preceding
of 1948.
over
in
New
week
Federal Reserve Board's index, department
City for the weekly period to Oct. 2,
York
by
6%
no
change
from
the
was
same
period
registered
over
For the four weeks ended Oct. 2, 1948, no
that
by-5%.
the
to
store
of
last year,
-'v
but for the year to
last
the
In
year.
similar
the
week
change is recorded
date volume increased,
"
30
(1562)
THE
A New
(Continued from page 8)
and
although
their stock at the bottom and most
customer
your
owns
none, you should know that
he holds oil
company ''A." which
has nearby
property and he might
increase his position.
want to
Among
chap who
the
friends, I number
my
a
watched
as a young man
ticker
date
bullish at the
client
top.
successful, all
The
man
feel
news and events of
every charac¬
ter, anlyze it, and be prepared to
express his frank opinion when it
is
requested
is
a
most
1917
had
was
sage
its
completed
before
significance
clients
who
the
mes¬
had deduced
and
his
posted
sble to enter
were
a
stock market ahead of almost
war
Quite frequently, an im¬
portant piece of news will be pre¬
anyone.
sented in
ticker
is
in
or
to
up
a
the
its
spot
obscure fashion
an
and
newspaper
alert
on
serviceman
significance
along to interested
and
pass
the
cialized
good
fortune
to
it
all
not
are
the
executive wishes
broad point of view.
a
Haying examined
activities of
service
in
general
terms,
by
executive
be
years
of
an account
extremely wary of
in that field. The
concentrating
wisdom of this becomes
apparent
when you remember
that market
their
allegiance
and make quite a hole in
the busi¬
ness of the account
executive who
has neglected other
fields.
Under no circumstances do
I
wish to create the
impression, that
the
occupation of
service
man
should be
avoided; I merely wish
to emphasize the
fact that to be
successful in a substantial
way
other
many
divisions
of
the
count executives' work
must
fer,
and
the
assumed
of
until
your
value
risk
should
you
confident
are
later,
all
sorts
of
your
adverse
conditions.
recognized
executive
duties
is
that
which might be described as
"spe¬
cialists" in foreign and domestic
economic;^ financial and
problems. As
an
pected
that
to
the
on
that
many
clients, he will
usually
have
political
account executive
progresses with his
discover
he
definite
is
ex¬
opinions
intangible
factors
influence
the ebb and flow
of security values. A
good statis¬
tician
can
securities
or
help
you
basic facts
or
a
and
to
research
man
understand
regarding
the
industry
an
company and its problems,
the information you
acquire
lead to the honest conclusion
that at a particular
price a par¬
may
ticular security is attractive. The
President of the United States or
Dictator
a
issues
a
ment
in
a
hov/ever,
tax depart¬
makes
petitive
have
calculations
developments will have
are
on
the
whole and specifically
the stock that he is about to
pur¬
chase.
In
that
must
be considered
requiring that
interest always be
considered first. It should not be
difficult to understand the wis¬
such
policy
a
exists the
because
misgivings and
suspicions that in the
past plagued
the minds of customers are
allayed
and although at times honest
dif¬
ferences will occur, the firm can¬
not
be
reproached
vital interests..
r> --
for
ignoring
An obligation to the firm has
been made the second
point in the
credo of the account
executive be¬
cause the firm is
always-striving
to
supply maximum aid to its sales
force with the
primary objective,
the greatest good of the greatest
number. The
advantages that fol¬
are
because
many
with
the
whole organization
cooperating to
insure the most profitable
the
individual
benefits not
rect
account
executive
only by his
efforts but
also
di¬
by the good
must
realize that occupants of high of¬
you
mighty sorry predictions.
Good examples that come to mind
are
the
American statesman who
thought Hitler would never go to
war,
those who thought there
would be
war
every
time
a
crisis
arose
in
Europe from 1933 on¬
ward; government economists who
are
specific examples might
be offered to illustrate the
points
i am
trying to make. Recently the
proprietor of a small retail store,
in surplus
ars
and
count
thousand dol-
cash, opened
from
the
tained at the time
that
he
it
ascer¬
was
evident
or
nothing
little
knew
an ac¬
facts
the
security
risks
that
wished
to
his
put
and
ecutive's
know
customer than to say "I told you
so." Should you survive his anger
and retain his account, not even
the
result
grieved
when
executive,
the
owner
of
suitable
which
as
cost
ac-
result
a
customer
stocks
for
was
his
him
tiie
large
It
confusing category
category "B,"
rail
performance of the oil stock. With
you,
flected
one
marketwise
consolation
no
edged
most
the
bulk
securities,
the
discovered
her
gilt-
reinvesting al¬
age
to
situation
before
was
real dam¬
any
done, and, without loss
anyone, the commitment was
was
liquidated
and. the
established
along
account
This
was a case of
category "C"
being confused with category "D."
1 recall
vividly another instance
wealthy individual, high¬
ly speculative by nature and com¬
pletely happy only when taking
long chances, began to deal with
where
H
a
account executive who
his
was
client.
As
duty
to
with
that
and
tude
thought
reform
the
to work as a team.
tion
of
the
fact
executive must
customer and
that
the
account
some
discussing it with
think first
second
his
of
the
firm, it
becomes obvious that his third
re¬
sponsibility namely, that to him¬
self, can be discharged without
undue personal sacrifice.
As
the
his
sues
account
daily
sooner
posure
later
or
to
executive
pur¬
activity, he will
realize, after ex¬
enough
prospects
and
clients, that
they fall into broad
groups, which I roughly classify
follows:
(a)
who
The one with small funds
is uninformed and
wants to
there¬
than
Considerable
the
good
stocks.
irritation
followed,
culminating in the loss of a very
lucrative
source
because
the
confused
category "D" with cate¬
of
business
account
(c) The
stantial
one
means
of moderate to sub
who is uninformed
and wants to protect what
he has
(d) The
one
gory "C."
nounced
that
to
Many examples could be given
unthinking account execu¬
tives who approach institutions,
such as banks, investment trusts,
of the
quite
active
to
the
restrictive
that
tions
their
in
guide
investment
institu¬
such
selection.
In
addi¬
means
to
purchase, for example,
tain preferred
who knows
nothing
existing
throughout the day.
(f) Institutions
1.
cialized money market factors that
will cause an insurance company
3%
about everything and simply warn;
to be posted on what is
happenin
or
basis,
seems
able
a
stock offered
cer¬
on
a
while rejecting what
an equal value avail¬
to be
on
ficulties
a
3V4 %
basis.
Such
dif¬
be avoided by learn¬
ing in advance the basic require¬
can
ments.
hopes, ambitions, fortitude,
etc., of a client and rigidly adher¬
ing to them, at least until such
time
as
you
know the rules have
changed.
group funds
Banks
2.
tion, they will frequently evidence
complete ignorance of the spe¬
Estates
3.
Trust funds
4.
Investment trusts
I
also
recall
the
vital mistakes
he
is
tape
of
speaking to the
trust
a
Such
rough
a
for
customer
a
are
idea
looking
as
upon
individual
an
not sure whether
am
research
our
currently
ion
a
department
very
is
favor
here.
The
have
no
the
upon
ol'
the
if
vidual
it
rather
securities
some
the
like
such,
you
possible
as
moving higher.
hand
We
Motors
General
other
the
but
Studebaker
on
is
this, Hudson is doing that.
Individual
him
traits
of
the
.
.
doing
.'
customers
by the formality
formality with which
accept you. The pace
of
lack
of
that
as
valuable
make running
history
his
executive,
and
so-called
good* old
days,
■
1
The physical* and rtiental effort
involved in going to work usually
consisted
names
of
concentrating on the
the people he had
might be relied
all
of
met and who
ever
upon to supply a helping hand to
somebody starting out on a new
career.
tion
Unerringly the concentra¬
to brought up the
referred
following
approximately
in
First, relatives—provided
at least
was
there
little money in the
a
financial
Jones
may
all your life, whereas another
become
Bill
to
after
you
second
meeting. Should this hap¬
however, be sure it is the
expressed wish of the party and
pen,
not
on
because
your
Many
of
part,
clients
undue
familiarity
■
highly
opin
Second, former schoolmates be¬
of the,undying allegiances
are
supposed to develop in
that
people herded together in quest of
education. This optimism, how¬
ever, failed to lake into considera-
an
t ion the fact that other classmates
yourself
fact
never
wishes.
that
recognize
it
run
You
is
fore
do
foisting
their
not
traits
their
forget
they are
contrary to
must
employing, not
such
never
money
yours,
make
the
where
competitor.
was
his
would-
aggressive
It also overlooked the
that the
classmate
might
re¬
gard his position of trust so highly
that he would not hand out busi¬
ness
for the largely frivolous rea¬
he went to school with
that
mistake of
the person seeking it.
contemplated
you
customer
son
an
their
ambition and
and there¬
opinion on an unreceptive person. The only way you
can
be certain is by asking your
clients point blank if they wish
you to volunteer opinions or to
criticise
same
he quickly learned that his
be
to
a
cause
ionated with respect to their views
on
markets and you must train
and
was
on
career.
might have the
are
the
order mentioned.
set
client. One William
remain Mr. Jones to
upon
of his tongue given
telephone and told to
a
work.
family and provided that he
the first member to embark
your
In
he
fig¬
a
they
familiarity should at all times be
by
en¬
over.
depended largely
glibness
to
man"
before
the payroll at
on
or
unla-
"customers'
problem
us
consider
and
original
title
the
desk and
a
emphasized
are
about
you
account
mented
died
and say: "The Motors are all over
the tape and
the
go to
.
dealing .in
than indi¬
as
quickly
as
how
give
put
.
if
available
not
trading account.* Let
into
that
would probably reach him on the
telephone
dummv
the
trader
symbols
and
the money
ure
If
...
talking to
wool
academic
as
you
are
because
is
asset
everything that has been said is
available, I think
XYZ because of.
Finally,
precious
was
reasons
funds
account executive ob¬
an
customers
lightened -leadership took
might be advisable to sell
your
how
tains
opin¬
of
It
time, however, to touch
the all important question
solved
purchase
is and
high
holds
favorable
regarding General Motors and
would
discussing
account executive
how he handles his customers.
delve
have any funds available, but
you
think
Third,
his
circle
of
friends,
which included everyone from the
chap he bowed to in the elevator
yesterday
to
the
known all his life.
ac¬
however
that
justified.
going to
go
ones
he
If he
thought,
such
people
had
were
out of their way to
Once you have established clearly
trust
that your opinions
investing, speculating or whatever
form it took, he was simply fail¬
are
and the purchase of a low
priced but good quality oil share.
The
executives who would
or
are
not
smoother.
account
need
an
a
welcome, the sailing will be much
low priced railroad
what
estate,
the sale of
stock
least
at
you
the
stocks,
or
common
approach might be somewhat
follows: "I
as
fund
in
man¬
tions
discreet, experienced
all
are
IIow to Obtain Customers
is
and
made by a number of people some
years
ago in connection with a
switch
suggestion that involved
a
services.
Thus far I have been
speculative
the
on
with ■A assets
your
may
as
its
hope the examples cited will
of
has an¬
willing and
accept
If you were
having anything like
clear idea
person
By the way, our
research department likes it and
I suggest that you
buy it here."
you
policies
impress
that
Should you
a
moving higher.
insurance companies, etc., without
a
speaking
risks, you would probably, after
making the necessary observa¬
tions, tell, him: ."General Motors is
or
of moderate to sub¬
but wishes to augment his
wealth taking chances.
only
executive
.
less wants to take
changes to get
sub¬
a
1
who
means,
prepared
it
stantial boom, in which low priced
cats: and
dogs were far more
buoyant
time ahead."
substantial
of
stocks.
Shortly
after, the market enjoyed
to
fact
important and
are
to
the
uninformed
be
the
common
strives
with
policy
of
course
has
practical
limitations and qualifications, but
none that justifies
causing need¬
less irritation with any customer
your
are
for
in
encourage all
With recogni¬
firm
a
public
person
with in his own right and different in
only modest funds that he wishes, various
ways
from other
cus¬
to safeguard, you would
probably tomers. Examples could be fur¬
say: "Our research department re¬
nished ad infinitum and one can¬
gards General Motors favorably in not be
very long in the business
the motor field, which they be¬
aefore he realizes that hardly
any
lieve is likely to enjoy prosperity
two customers are exactly alike.
ticker
to
and
»
entitled
vary with the
gain by association. Also,
you
customers
r
customers
exactly
atti¬
knowl¬
are
will
edge
ing them with ultra conservative
designed
the
dealings
will learn
accordingly
*
never,
where
of your
course
with
contact
mention your big customer.
is
of
special significance
never
Individual
customers, you
hardly any two
alike
result, he persuaded
a
the
ager
re¬
lines.
proper
other
your
,
Customers
In
his
should avoid talking to him about
disgust prior
com¬
proceeds in one
highly speculative common stock.
this
of
in
every
entire
Fortunately,
was
customer likes *
every
that
however brief, he is the only
that counts. Accordingly, you 1
This
Knowledge
to
of
that
the clients who
to
had disposed of it in
to the rise.
feel
of
pletely uninformed and sorely in
need of wise, conservative coun¬
sel. However, the account execu¬
tive in very short order had dis¬
of
but
to
If, for example, you
Again, a widow who had a short
previously inherited a sub¬
fortune, largely in the
form of high grade securities that
had been carefully accumulated
by her husband, consulted an ac¬
posed
Practically
the passage of time, the superior
quality of the oil stock was re¬
give
with
was
and it turns out wrong.
ease
a
"A"
She
will be able to help you the
he follows your advice
next time
different ways to different people.
time
executive.
God
very
to "lose a
of
and
stantial
count
were
shortly thereafter
far outstripped the
I
Personally
better way
no
by stressing the fact that there
big customers.
the
un¬
part
was
of
chance
wishes.
of
cussed; you will learn that the
same story must
be presented in
became
purposes
a
the
to the account ex¬
contrary
because they fall roughly into the
broad categories previously dis¬
completely
bis modest fortune.
of
that
speculators
much
into
money
done
Others, however, indiscrimi¬
nately recommended the switch,
with
en¬
stocks of good quality rather than
esser known
speculative issues.
things
of
customers
in the interests o£ greater protec¬
accompany
commitments
reminding
tion.
ments
constantly predicting either a
A good account
executive, by
or a
bust, corporation heads judicious questioning and observa
who are usually most bearish on
tion, should ascertain at an early
boom
A few
few
today had they not all too fre- ;
quently made the vital mistake of
the
rail mentioned and suggested that
be replaced with the oil stock
taking
landling.
a
examined
it
+he client to dispose of a number
of his speculative,
issues, replac¬
fice
do
not
necessarily possess
(e) The wide field of individuals
prophetic perfection and with all
of little to very substantial
means
their private, confidential infor¬
who think they are well informed
mation
they
frequently
make
some
worst, grief and loss
possessed of
time
should not hold
nature
sharing plans exist, bonus ar¬
rangements,
and
other
induce¬
it
stantial
connection,
can
and at the best the
of the account which you are
os.3
an
own
results of others. This is
why prof¬
as a
this
really
sooner or
the custo¬
a
ruling, another
protect what he has.
brings out a highly com¬
(b) The one with small funds
product, and overnight who knows
nothing but neverthe
predetermined
market
been
has,
basic policy
a
upset, and your client is asking
rich quick.
your opinion as to just what effect
the
account
the customer's
as
Europe,
statement",
company
No
results,
The final broad
category of ac¬
count
miscalculation
cause, at the
to the client
which
various
first, the firm's second and after
that, his own. Eyery firm should
low
ability to maintain
under
be
category any
It is important to do
fits.
ount
important
an
allegiance.
executive has. ever
ac¬
suf¬
not
the
or
dom of
traders are highly
temperamental,
frequently fickle, and at times will where it
abruptly transfer
which
-
because
so
their
Unfortunately, the situation
not fully appreciated
by the
to his responsi¬
as
mer's interest
is that until he is
seasoned
to
account executive
an
fore
experience,
our
spe¬
account
develop
successful unless he
thoroughly
in
on
into
the
at
deavored to make it clear that he
has little time for
any other
division of the business and there¬
man
all around
executive
Thursday, October 14, 1948
his accounts to find those that by
publications in the fields of poli¬
bility
my advice
know
Customer's Interest Is First
Consideration
an
a
to
the
have
tics, economics and world affairs
it generally, is well worthwhile if
to. insure
best,
CHRONICLE
sbout
question arises
his
This
of
I
problems is always sound
seasoned account execu¬
tive must be forever cn the alert
At
part
years
a
around,
forgotten.
FINANCIAL
and most of the time correct.
Time
devoted to the
reading of serious
service
that his clients
clients.
the
over
astute
individuals
business whose judgment
parties.
Opportunities for good
arise daily and
by his
fascinating
and
many
Must Be Alert
activity
ac¬
executive, conscious of hu¬
fallability, will accordingly
that it is his duty to
study
work
almost
around
count
tapping out the news
of the
sinking of the Lusitania in
and
&
Philosophy of Security Selling
possible heavy selling starts.
Oil
company "X" reports a new gush¬
er
COMMERCIAL
There
are
him
with
their
business
of
ing to take into consideration the
many
former
accoun
be around
fact that they probably enjoyed
profitable relationships with
<
Volume
168
i
others which
«
to
disturb
of
they
reluctant
were
friendship.
checks up
'
.
he
entered,
flected
have
he
been
and
should
the fact that
oil
of
aware
unwilling
were
have
re¬
they might
his designs
to
become
victims.
Friends and
•
Customers
,
Lest
let
-
Strangers
there
me
say
be
as
<
doubt
about
it,
that all of the metnods
Competent Staff
A
The next consideration of ma¬
people, capable of gathering
business
produced
in
the
past, and produce it today.
There are, however, serious ob¬
;
jections
;
the
on
| :
r'
pursuing them unduly
part of really
serious-
to
all available information on every
realistic conclusions
particular security is appropri¬
a
ately valued, at least in relation¬
As
result
a
this
of
labor,
thq,
firm
the
is
merit influence their bounty.
possessed of genuine
in his ability to render an
essential service, should be happy
in the knowledge that the order
ready at all times to answer the
individual inquiries of customers
complicated they
man,,
received
due, not
was
his
to
abilities but rather because he had
taken advantage of friendship to, a
point whe'fe a bone had to be
thrown in order,to get rid of him.
It
should
that the
also
be
rememoered
in the field of
newcomer
financial selling is under
nerv¬
a
and
arise
which
prospects
their
from
personal situations, re¬
how specialized and
own
gardless
of
Time
does not permit any more than a
very brief reference to the work
of a large research department. I
can
assure
be.
may
however, that its
you,
operations are extensive and com¬
plicated and a far cry from th£
days when it consisted of little
handicap when he succeeds in more than a few standard statis¬
obtaining business from close as- tical records, the Dow Jones Aver¬
ous
■
soclates.. This is because he lives
ages
to
degree or another with
them and where he has influenced
tician who
their decisions, as he frequently
will, the strain of worrying about
how time will vindicate' his rec¬
*
production number.
example, I have
For
on numerous
an
one
ommendations
is
His best
great.
friends, however kindly, will not
hesitate to reproach him severely
if and when
I know of
friends
have
relatives
or
where
numerous cases
favored
a
in high
young
place
not
man,
gation and knew he
was
least
at
things
and
and
jack of all tracies
was
master
statis¬
overworked
an
of
Finally,
none.
as
inducement to have Mr. J ones
place his business with the firm,
numerous extra services are sup¬
plied free of charge, and when
left
sums
deposit
on
invested,
are
interest is credited.
not
merely
who makes
one
a
for
the following reasons:
(1) Because you have complete
unshaken
faith
in
to
study
constantly
keep abreast of the
in
order
many
.
tainment of
a maturity which alcertainly will, in time, attract
the attention of your friends, rela¬
.
*
most
.
tives and clubmates.
1
are
1
will
seeking
not
tarily,
you
at
proach.
have
On
a
you
be
may
least
Then, if they
volun¬
out
certain
welcome
they
your
&p-
part, you will
confidence in
abilities sufeliminate any misgiv¬
your
justifiable
yourselves and
your
ficient to
ings as to your right to let anyone,
friend or stranger, know that you
are, quite frankly, seeking their
,
■
"
business.
What
seems
least
*
then
be
to
one
is
so
case.
experience
the
method
successful
that
in
at
Based upon direct
and
observation
of
many successful men over the last
years,
two broad
„
-
*
the
it
strict
requirements
Remember
suffered
estab-
years
that
financial
because
clients
some
losses
their
in
broker
prior
over-
looked the importance of adequate
.
V-
let,
analysis,
company
industry
survey or whatever it may be are
received,
they
promptly
and
are
the
inquirers referred
acted
names
upon
of
to account
the
exec¬
/
utives.
What follows
thereafter varies
greatly, depending upon the in¬
genuity, perseverance and deter¬
mination to move ahead of the
individual account executive.
contact is made with
As
a
receptive
prospect, the facilities of the re¬
search department are called into
action to
the queries and
answer
supply the information
or
data
re¬
quested, and at this point the firm
can
be about 90 %
capital and
many
theless heard
did not,
stories
never-
about
who did.
those
ate
to
offer
some
suggestions
as
to just what an account executive
might do to help
Alter
on
insure success.
all, regardless of the career
which one
embarks, he should
keep in mind at all times at least
minimum
goals
and
strive
con¬
This problem is met by stantly for their attainment. I hope
having at all times more than I may be pardoned for stating that
enough capital and voluntarily as a result of observing many
making certain that every client young men in our business they
.-receives
a
financial
report
at seem to possess, with few excep¬
least once a year. Accordingly, no tions, one fault to a greater extent
account executive need have misthan any other, namely: that of
givings as to how the firm will feeling they should reach certain
...;
f
.
-
-
-
.
Second, by the various ex¬
changes that approve you, and,
third,
by your own
its conception
upon
firm, based
of the best
its name and
methods of making
reputation
with
synonymous
sound, financial conduct.
(6) Prudently avoid
opinion is always right,
familiarity with your clients.
Relationships maintained
on
a
sary
professional
most
basis
invariably
are
enduring
and
yourself
tion that
personally
acquired.
(8) In the
(7) Never become dogmatic and
mastermind
can
you
retire
the
and
perfec¬
other person has yet
no
■
JC"
.
course
./'/V;
of your career,
will learn much of value from
clients and the knowledge thus
gained will help you in your ef¬
you
forts
to
help others.
(9) Never believe that
have
immediately the
question put to
clients.
One
of
ful, effective
the
you must
to
answer
by
you
most
answers
is:
your
power¬
"I don't
know, but will endeavor to find
out."
(10)
takes
that
of the client who
Beware
up
much
so
sooner
or
of
time
your
later you are com¬
pletely dependent
own-private life.
you
to
satisfac¬
over the years they will
give maximum satisfaction with
minimum Interference with you
that
to
capitalize
tory and
decide
it
owe
every
unneces¬
that, based
other theory,
any
him and
upon
otherwise useless to yourself and
firm.
your
y
7%
;
Private Placements—A New
Medium oi
Financing
(Continued from page 15)
peting
buyers
take
may
most
gross incomes
of $50,000 or more
shows total current net income to
only one-third of what it
records
are
important at all times
and therefore keep yours neat, ac¬
curate and current.
(4) Because you
are
working at
all times to expand your field of
clients and prosp ects in order to
avoid dependence upon the whims
and fancies of anyone.
(5) Because
him
manager
regularly the various prob¬
they arise.
lems as
(6) Because you maintain good
of
the
they
issue.
acquisition
or
of
even
Since
the
forces have
contrast,
ex¬
justified because
to lead to the
are
likely
are
blocks
By
substantial
sized
of whole issues.
other
powerful
come into play to in¬
crease
the
volume
of
private
placements—and these have in¬
war
lion
to
$1,700
wonder
that
million.
the
Is
stock
market
finds it difficult to digest
of
sues
common
and
was
it any
new
is¬
preferred
stocks
without causing price de¬
clines, sometimes quite sharp de¬
clines, when the net income of the
traditional stock buying class has
volved
businesses
of
all
sizes.
been reduced so drastically?
First, and perhaps most important
the demand for capital has in¬
As for the inheritance tax, I am
creased
enormously and is still sure most of us could cite many
examples of closely held corpora¬
very large. As prices, wages, and
volume have risen, much larger tions that have needed additional
sums than were originally antici¬
capital which in former times
pated -hav6*been required tb fi¬ would have come from the own¬
In case after case, however,
nance
business expansion, mod¬ ers.
ernization, the carrying of inven¬ such owners either are not in a
tories and so forth.
to
put
up
additional
And in the position
meantime the demand for funds money, because they haven't been
to finance real estate mortgages able to save it or they haven't
.
cooperate with
and discuss with
you
your
office
ca¬
and
municipalities
fold.
has
expanded
dared to make
additional invest¬
ments for fear of
tying up liquid
might be needed by
pay
inheritance
Effects of Taxation
taxes. And so, many of these com¬
At the very time that this great
I suppose no one should com¬
panies have had no other medium
demand for capital has been going
for financing except borrowing,
plete, a talk of this nature which
on,
an
almost
revolutionary and no potential lenders for longis really an attempt to explain
change has taken place in the size term
funds
except\ insurance
how an individual succeeds in a
and composition of the supply side
companies through private place¬
highly specialized line without re¬
of the equation, largely as a result ments.
citing at least a few overall prin¬
of the incidence of personal in¬
We have only to look around us
ciples or axioms that are always
come and inheritance taxes.
I do
to see what is going on. The pres¬
true, despite the occasional excep¬ not think the
country is as yet ent boom is
tion that may occur. In my ex¬
being financed more
aware of the implications of this
and more on debt, and less and^
perience and based upon close
change. And I sometimes wonder less on
observation of the activities of a
equities. In the first eight
if we in the insurance business
months of this year over 82% of
great many highly successful ac¬
realize how it has increased our
new corporate capital issues con¬
count executives, I feel constrained
relative importance as a source of
sisted of long-term debt. Less than
to emphasize the following:
new investment funds.
9% was through common stocks.
(1) You are not
merely a sales¬
professional work¬
er
performing dignified and es¬
sential services. Although cynics
man
but also
many
funds
We have heard about the
with closed minds may feel
other¬
enor¬
postwar supply of savings.
is large—but it is mostly in¬
mous
It
vested
in
government bonds,
insurance,'
homes.
sayings
banks
and preferred stocks.
in
I
that when
new
en¬
recent gas
pipe-line companies start out with
as some
80% of their capital in the form of
I am not talking about the pool of
capital resulting from past savings
invested
me
terprises such
debt,
But what about the effect
now
It seems to
to
life
on the ability oi peo¬
ple to accumulate savings that can
be invested in business equities?
is
heirs
and
of taxation
that
which
their
a
wise, I have always considered the
customer. work of a good account executive
As I approach the end of my
talk, I think it perhaps appropri¬
SEC.
or
1929—a drop from $5,200 mil¬
recognize that
certain that it
can
lished by regulatory bodies, pub¬
lic and private.
-
As the request
product, book¬
strict
to
yourselves
charts
in
you
be divided into has acquired another
oh a par with that of a doctor be¬
parts.
The first part Likewise the account executive
consists of what is done to justify must start thinking of the various cause, in broad terms above every¬
the right to have the business of, points I have previously made, thing else, the individual values—
let us say. Mr. Jones who is not at such as salesman, financial coun¬ first his health, which is the do¬
the moment a client. Well, per¬ sellor, etc., classification of the main of the doctor, and second his
haps the number one consideration customer, the customer as an in¬ wealth, which is where the ac¬
count executive and financial ad¬
is to make certain that, the firm's dividual, etc.
visors generally come in.
capital position at all times is
Question of Compensation
more than sufficient to meet all
(2) There is very little relation¬
six
„
account executive.
subject
ever
have
you
private deals
(3) Because
its
for the advertised
business, at all times
our
you
where
be
right to his business? pacities as they can be of great
Here again, times does not per¬ help in difficult times.
(7) Finally, because you recog¬
by at least one firm is the best mit extended comment on the im¬
and, utilized
properly, an am- portant topics of sales promotion nize that there are no regular
bitious, competent beginner can and advertising. I would like to hours for one who really loves the
operate free of the mental and observe, however, that the proper work and wants to make progress
emotional hazards mentioned.
It blending of the two features re-r in the business.
leads to the steady acquisition of suit in bringing the potential cus¬
Overall Principles
experience knowledge and the at- tomer literally to the desk of the
*
convinced
on
Should
stage
tensive investigations of potential
associates, regardless of their
of
the
of
the customer, having satisfied it¬
self
are
codes,
laws, and rules of procedure es¬
tablished first by your govern¬
ment through the medium of the
the
market.
your
(5) In
you
the
reach
markets and cause values to fluc¬
tuate.
foregoing that of all of the methods of obtaining customers in the
financial
business that followed
period
varying condi¬
of time and under
tions.
to
factors
relatioftSPwith-all
seem
reasonable
and forces that influence financial
lates to the firm's efforts to find
impose upon
It would
a
business,
firm, and your own abilities.
(2) Because of your willingness
obvious from the
not
results'over
be judged,
judged, by
be
your
The second part of the modern
method of obtaining business re¬
'
he
will
31
the
Firm's Efforts to Find Customers
him that
value
least should
liv¬
chasing reluctant people for
orders, it will happen primarily
inexperience and
friendship.
remind
real
at
or
(1563)
ing
your
and
go wrong
the real meaning of the word and
should
will
have realized his
:
oc¬
handed
ship to others, and what the fu¬ because of ability or lack of it but
ture seems to hold in store for it.t simply because they felt an obli¬
he
-
their
to
to whether
as
Your
their individual abilities in direct
ratio to the dollar volume credited
casions
addition,
No
1
them to relate
cause
capable of recording accurately
career people because ope firm; is constantly releasing jEut;
the specific order they were hand¬
never knows to what extent
pity,. production tools, detailed studies,
sentiment,
irritation and
other of individual securities and, Indus-' ing out at the moment. However,
if you are to be a success within
emotions Jhat have nothing to do tries.
In
faith
*
business, incidents of good
minded,
with
>
CHRONICLE
made
to
order
industry
and
corporate
entity
business
to
account
executives
therein, where there is even a
remote public interest. This work who had been working really hard
is continuous and, so far as hu¬ but producing only meagre results
and when the findfall increased
manly possible, is kept up to date.
their figures they acted as though
With the facilities mentioned, the
their skill had increased just as
next step is to study and evaluate
the information in order to reach sharply.
*
mentioned
our
fortune will
jor importance is to nave compe¬
tent
FINANCIAL
income heights more rapidly than
they would in any other field.
in
pro¬
by in¬
if he won¬
vading the club and
dered at times why certain peo¬
ple always seemed to leave when
!
Jones
Mr.
its financial condi¬
on
&
Perhaps the explanation is that
clients
of
source
COMMERCIAL
tion.
Finally, he exhausted his
spective
cautious
when
fare
name
in the sacred
even
THE
4742
Number
common
talking
currenl ly being
am
about the money
saved that can reasonably be ex¬
have convincing proqf
equity money is extraor¬
dinarily scarce and that if financ¬
ing is to be done at all it has to be
that
we
new
largely in debt form. An
equally convincing demonstration
very
of this
situation
phone financing
period.
Decline
is the Bell Tele¬
in
the
of Individual
postwar
Investors
pected to flow into new common
As I mentioned earlier, the in¬
ship between the capital value of and
preferred stocks
in
large dividual investor has become a
an account and its income
produc¬
enough volume to keep the capi¬ progressively less important source
ing possibilities. Depending upon tal structures of our
expanding of funds for medium and longthe individual background, it is
term loans, that is to say through
corporations well balanced.
possible to actually lose money in
A sufficient number of surveys the purchase of bonds, while in¬
carrying a so-called million dollar
has been made to justify the state¬ stitutions have become more im¬
account that is inactive (and many
ment that the bulk of new equity portant. For a considerable period
are) and make money with an ac¬
the commercial banks were meet¬
capital, and I emphasize the words
count modest in size.
"new equity capital," has
come ing a large part of the demand
(3)
You
can
only
express in the
past from people in the through what have come to be
opinions, whether they be your higher income brackets. But these known as term loans, running up
own or those
of your firm. You are the
to 10 years, or in a few cases
very
people who have
cannot
and must not guarantee1 been hardest hit
even longer.
According to a study
by the nearly
what will happen pricewise with
made
by
the
Federal
Reserve
confiscatory surtax rates of our
respect to ahy security and when. progressive income tax. A recent Board, term loans extended by '
,.(.4)
with
Initial
a
client
success
means
or
very
failure
little.
of the aggregate net in¬
after taxes, of people with
estimate
come,
member banks amounted to
(Continued
on page
32)
a
lit-
32
(1564)
THE
COMMERCIAL
&
FINANCIAL
CHRONICLE
Thursday, October 14, 1948
1
A
stricted by law or regulation.
All
I should like to
say in reply is
that the same laws and
regula¬
Private Placements—A New Medium oi
Financing
(Continued from page 31)
tie
over
of
1946,
total
$4V2
any
Investment
the
double
But
since
1946, with the firming of
short-term interest rates and the
raising of- bank reserve require¬
ments,
commercial
banks
have
tended to reduce their term loans.
This has meant that in the
past
two years
especially, corporations
have turned
surance
think
companies for
most
making
-
of
as
inquiries
have
for
can
the volume
loans
has
creased very markedly.
I have tried to show
.
been
placements
result
a
in-
that
the
placements
logically to meet
changed conditions in the capital
.
markets, that it has filled
And
'■
to
••
in
this
connection
it
seems
important to point out
me
of
need.
a
the
some
social
considerations inLife insurance companies
become the most important
-volved.
•have
1
private
.
of
•
custodian
the
the
savings
people. Part of
responsibilities is to
broad
our
of
American
.
7
;l.y'r-'ployment
"
to
for
the
criticism
if
confined
we
to
the,
our
largest
markets.
It seems to
our
job to leave no
turned
'
to
find
financing
known
7 and
rec-
me
stone
sound
smaller
un-
of
ways
less
or
that
concerns
part of
well-
are
worthy
managed. We ought to
be sufficiently expert and
enter¬
prising to appraise such compa¬
nies and put our policyholders'
and
well
funds
.
to
work
in
them
with
safeguards.
proper
:
;
-
'■
•
-
•
;
•
liabilities
Without
able.
medium
are
our
any
commercial
friends, I submit that
bet-
a
ter
case
can. be
made that the
banks have invaded the insurance
field
than
that
we
have entered the
banking business.
In
fact
vestment
I
cannot
through
•
why in¬
private placebanking opersee
ment is any more a
ation than investment in the
open
'"'- market;
In both cases what we
receive
*l-f is
-
•
it
as
a
evidence
as
bond,
a
In both cases
of
debenture
we
loan
our
or
a
note.
have to appraise
whether the price and yield compensate for the risks, whether the
indenture provisions provide suf¬
ficient
to
safeguards.
measure
these
And
we
have
againsLyields
ond risks of
comparable securities,
whether public or private.
-
"
would
Of
ments
at
seem
course
aren't
the
SEC.
private
listed
But
on
the
ex¬
truth is
that
the marketability of a listed
registered security is no longer
what
it
used
to
be.^. Generally
speaking, large blocks of securi¬
is
money
difference
truly
in
in
Bulletin
the
like
to
the
rates
the light
of
quote from
Federal
May,
or
such'
owned
small
in r
that it is readily
blocks.
For
need only turn to the situation in
host
a
bonds
stocks.
As
;
well-known
well-known
railroad
preferred
7;C77'
.
practical matter, the fact
security was placed pri¬
does not by itself mean
a
that'
of
and
a
vately
that
it
have
been
is
unmarketable.
There
many instances where
companies have resold
a private
placement without great
difficulty.
But even if it be as¬
sumed
that
private
placements
have no liquid marketability, why
insurance
should
this
disqualify
them
'
-
offsets
are
to
lack
the
ules
should
thus
reduce
A fourth criticism
two
on
is
that
most
ments
are
in
the
private
industrial
place¬
field,
that industrial investment is much
riskier than other fields and par¬
ticularly
risky
medium size
or
it
when
involves
small corporations.
of
course
which
events
has
been
in
to
this
me
between
is
a
ability to liquidate
assets, but
quality of
income and
outgo, as well as
If by
banking the critics of primean the invest¬
ment banking
business, I should
say the criticism is even less valid.
1
'
/
y
t
our
from the character and
our
of our assets and liabilities?
It
is all too frequently forgotten that
even in the
bottom years of ex¬
treme depression in the 1930s the
income
whole
ments
of
by well
dollars.
sion
life
their
a
disburse¬
half
over
as
a
billion
Since those
years
deep depres¬
liquidity has been
our
increased by
a
change of law. Our
large holdings
ment
companies
exceeded
U.
of
securities
are
S. Govern¬
how eligible
for
rediscounting at the Federal
banks, arid this rediscount
privilege would;, seem to more
than supply any unusual
tempo¬
Reserve
need
rary
that
may
arise
for
liquid funds.
Comparative Safety of Long-Term
Loans
A
third
>
j)
(
criticism
which
of. private
rests
in
f,
part
'
i
1944,
involving $55 billion of bonds,
shows that industrial bonds gave
a
far
superior
performance
either public utilities
Their
due
realized
to
or
yield
default
at least ^equally;as good as
public
issues '-c pur¬
insurance companies,
by
that
in
many
cases
they
are
:may-
nave
greater
market¬
ability,. ''V:1
ments
than
railroads.
after
losses
are
deterio't^^ip^^^fTf^^f^J
The rapid
holdingsl^Ps^l^r'M^
rais^pgjjPJ ^§££77
asrwelttasrfof
ance
ments has
lems for ourselves
the insurance
confrm^ibrifers.>Tlie.j 77
investmen^Ws,7t£eq.ue|tly^^
more
Valuing Private Placements
Second, in the great majority of
private placements, at least those
that
have
the
protective
by
upon
have
to
come
insurance
tended
attention
my
features
to
insisted
companies
be
stronger than
those customarily found in public
I believe this feature can¬
issues.
not be overemphasized.
I remember one
•••
negotiation
we
conducting with a mediumsized Southern corporation which
was represented
by a lawyer who
were
not
was
porate
familiar
too
finance.
with
cor¬
l.
■
Perhaps the most thorny prob¬
the
the
and the one involving
greatest
uncertainty
from
lem,
standpoint of insurance compa¬
nies, has to do with the methods
the National Association of Insur-
Commissioners :may;
ance
:ulti-
■
v-..
mately adopt for valuing private
placements for statement purposes.
The criteria now used for valuing
public
prices,
market
namely
issues,
yields
and
ratings
by
the
investment
services,
very
obviously cannot be applied to
After
struggling most private issues since they
through the first 30 pages of the are neither quoted nor rated.
If
proposed
indenture
terms,
he the Commissioners' Committee 00
turned wearily to our counsel and Valuation should attempt to ap¬
said: "Can't we just go back to a
praise annually the carrying value
nicelittle
old-fashionedmort¬
gage?"
"
~
Well, the answer was that a nice
old-fashioned mortgage
little
wasn't good enough, and it seldom
is good enough in an industrial
loan.
The real strength behind
most
of-each
industrial loans is not
physical property, for that is
ally incidental.
Rather, the real
strength lies in the faith and in¬
tegrity of the borrower, backed by
earning capacity, sufficient work
ing capital and equity, and the
intangible but very real value of
rience
a
tion.
issue,
it will
almost
an
be
over¬
administrative
task
are
approximately
2,000 of such securities now out¬
standing and the number is growing rapidly.
;
j
whelming
since
there
;
.
.
mere
usu¬
private
with
faced
v
calls
was
>
serious
thoroughly; inves¬ required incr
tigated before purchase than is the
Servicing and
case
with new public1 issues, rt
vestments, once made, calls ior
suspect that in public issues more
somewhat new techniques, not all
reliance
is
placed upon market of which have
yet been worked
reputation and less upon first¬
out in detail. 7
7;
hand knowledge and
investiga¬
successful, functioning organiza¬
As
insurance
companie
have gained more and more expe¬
and
been
I
say
this for two reasons.
investigation
First, I believe most private places, these
substantially
higher, the default ratio was sub¬
stantially lower and, as a matter
of fact the profits
resulting from
This
question
of
valuation
is
very much in the minds of both
the Commissioners and life insur¬
ance
It is one of the
companies.
subjects which will shortly be at¬
tacked by a
committee represent¬
ing the Commissioners and by a
new
all-industry committee on
valuation under the leadership of
Mr. Leroy
Lincoln... I have I no
doubt that these committees,
rep¬
in
negotiating
private resenting
as
they
do various
the total losses due to default.
placements they have found im¬ branches of the insurance busi¬
:
Another of compilations made proved techniques for safeguard¬ ness
as well as the insurance com¬
by this study very clearly indi¬ ing the p r e s e r v a t i o n. of these missioners, will be able to find a
cates that in the period from 1920- various
factors supporting
their- satisfactory and workable solutiori
40
the
performance
of
They have learned to adaot in due course.
bond loans.
v
prepayments
exceeded
issues under $5,000,000 was
rior to that of major issues.
only
exception
statement
riod
is
that
during
the
this
to
for
a
supu-
The
latter
protective
infinite
short pe¬
depression, ..the
There is
this
our
exception
should
not
be
of
major importance to long-term
investors like ourselves.
Are New Regulations
Required?
Finally,
a
sort
of
blanket alle¬
the almost
pe.r-
no
need here to discuss
such protective features in detail:
that
inferior; but
features to
variety of conditions
taining to individual situations.
market per f o r.m a n c e -of these
small bond issues was
I
should
.
be
the
last
to
maintain
they will guarantee that all
private ' placements' will al¬
ways
some
enjoy
of
has
a
suspicion
of
being
speculative.
Therefore, it is held
that the practice should be re¬
It would be
them
a
bold
man
indeed
who would predict what develop¬
ments may take place in future
private placements. Personally, I
;
have a feeling.that the usefulness, v
of
this
vehicle
for financing
extended.
cari^
and r will
be
matter of
national policy, incomeT
taxes are to be
full
If,.:
as
a*
a method for re-;
countered stormy weather.
I do
distributing wealth and new sav¬
maintain, however, that these pro¬
ings, and if, as a result, the tra¬
visions, if carefully thought out ditional sources of new equity
and drawn up, have in many cases
capital remain relatively dry, then
already proved their usefulness some steps will have to be taken
do
so.
,
I know of
where
an
one
.
sunshine; .for- and inheritance
have already en¬
used in part as
gation has been made to the effect
that
life
insurance
companies
through private placements have toward weathering adversity and
embarked on a brand new venture they are likely to continue to
which
placements,
1900, and
and
slowly developed dur¬
are
tion.
rests
assumptions, both, I believe, based
more
on
prejudice than on fact.
That
funds
superior, eveny though- public is-
im¬
one
remains
by
unsuspected
infinitestimal
an
insurance
average
chased
of defaults.
cause
nevertheless
life
are
and
7'/;.7
inated by provisions for manda¬
tory and contingent sinking funds.
These planned repayment sched¬
portant
it
of
the
refundirig is largely ; elim¬
and
normal
ties
1930s, notably in
railroads, were due not to inabil¬
ity" to pay interest, but to inabil¬
ity to refund an issue at maturity.
In private placements this
prob¬
lem of
which had
the
in
the
ing the period of lush business.
Steps were immediately taken
administered competently and un¬
by management to correct these
der the highest standards of trus¬
weaknesses, with the result that
teeship. Surely, until this is defi¬ the break-even point was lowered
nitely proved to be untrue, and from well above 70% of capacity
until private placements fail to to
under
50%. : The
important
serve
the
useful
purposes
they thing is that .these remedial steps
now do, further regulation or leg¬
were taken long before there was v-.
islation -.should
be
approached any question bf insolvency; and \v
reluctantly, if at all.
-.';'
they were taken because the mini¬
If
I were
to recapitulate my
mum-working capital provision
answers
to the critics of private served as a warning signal at- £>
placements, I should say that on relatively early stage
a situa-r
average, privately placed securi¬ tion which oth^^isd - nfiightAiave 77 •
part
the bor¬
on
other fields, shall always buy
sell the right things at the
true that all but
We all know that many receiv¬
erships
as
than if disqualifies real
there
payments
regula¬
successfully supplant the
or
_
assets than short-term notes made
with
the
expectation that
rower's' part." •;
laws
latively,
an
The comments are
equally
applicable to most life insurance
private placements. "Term loans,
made
under
prescribed
repay¬
ments plans, are generally sounder
or even in
evidence one
thought
be
temporarily, because it
that earnings would
management which revealed
leakages due to
faulty inventory control, various
inefficiencies in plant operations
and slack
selling efforts, all or
Reserve
loans.
large
modified
If there be a few who
because of incompetence or greed
invest
insurance
funds
specu¬
by
mean
agement asked that the clause
that I know of
way
either
right time.
they
as
those
customarily would be renewable at
maturity or
life insurance compa¬ than
long-term corporate bonds or
nies can nowadays be sold only
debentures repayable in lump sum
if another institutional
purchaser at
maturity. Although the amor¬
happens to be in a buying frame tization
feature does not protect
of mind. The fact that a
security the lender from the fundamental
ties
securities.
and
1947, regarding
safety of term
comparative
no
placed
reduce
to
quickly recover.
The holders or
privately placed securities of
tions can
this company suggested that man¬
judgment of management.
No agement investigate other reme¬
law yet devised ensures that in¬ dies to the situation first.
This
vestors, whether in the insurance resulted in a thorough check-up
cited.
in
is
whereby
difference in risk
a
debatable
should
article
place¬
any
stark
long
this
purchases
securities, govern
fully our purchases
as
privately
There
between
history, for in the past short-
I
first
or
vate placement
s
and
rates
tended periods.
perti¬
as
change and aren't registered with
,
•
I wonder if this is
nent
of
term interest rates often
averaged
well above long-term rates for ex¬
quently made about private place¬
is that they are unmarket¬
in
wishing to get into
controversy with
investment
-
of
equally and
As proof, the differ¬
interest
is at least
ment
pretty effective
and long term.
Traditionally, com¬ equivalent to the alleged market¬
mercial
banks
are
short-term ability of publicly held securities
lenders, because their liabilities in today's thin markets.
are
mostly payable on demand.
Before leaving this subject of
Only comparatively recently have
marketability, is it not important"
commercial banks loaned
through that we stress and j-estress that
the ownership of
long-term bonds our financial strength and solv¬
or
through so-called term loans. ency come not from theoretical
bank
-
in
part financed by the Joint Com¬
First, itf. is said, that through large amounts of
presently out¬ mittee on
Investment Research of
private placements we have gone
standing
securities
placed
pri¬ the American Life
Convention and
into the banking business and that
vately will be repaid each year. the
Life Insurance Association of
something ought to be done about As an example, the industrial
pri¬ America.
Some of the material
it.
If, by the banking business, vate placements owned
by my which
they have prepared, but
commercial banking is
meant, it company provide in the aggregate
which has not yet been made
seems to me the shoe
pub¬
really is on for repayment of nearly 20% of
lic, is of extraordinary interest
the other foot.
principal during the next five and
importance. It may surprise
Traditionally,
life
insurance years and 58% by the end of 10
you to know that their study of
-companies are medium and long- years, and this is on the basis of
all major corporate bond issues
term investors, because their con- fixed
sinking funds only. It seems offered
•;
■
loans.
short
objection most fre¬
of
the
are
tractual
'
The second
estate mortgages?
all of them.
•
term
our
of open-market
riskier than short-
are
marketability.
It is perhaps For the first
subject, and under¬ not
time, I believe, we
generally appreciated that the have available
standably so, of much controconvincing evidence
overwhelming majority of private that neither of
these assumptions is
versy and considerable misgivings
placements provide for very sub¬
in many quarters.
true. Many of you have probably
I should like
stantial
fixed
annual
sinking heard of the so-called
to take up some of the most.fre¬
"Corporate
funds, and many of them for con¬ Bond
quent questions and criticisms that
Project" being conducted by
tingent sinking funds, based upon
are made, for t believe there
the National Bureau of Economic
are
earnings as well. These mean that Research
sound answers to
rnents
-
being
loans, they
ence
tions which govern
assumption that they in¬
banking operation, is that,
medium
and
long-term
a
reflects
Granted all that I have
said, it ■.'And
a fact that private
place-
remains
■*
volve
offering. Both these goals are a
far cry from the long-term invest¬
ment objectives of life insurance
companies.
any more
Criticisms Answered
.
the
on
Whether
suitable life insurance investments
*
•
a
necessarily
:l;.'s "ognized highest credit standing
;;; - :,«irid ready access to the public
'
of
marketable
benefit; of
7' best known corporations with
v
hold
conditions will be at the time of
the
investments
•...
v
fraction
as a whole..; It seems to
would rightly be subject
7.,*]country
;' r' rhe. we
-
to
to ; it that these
savings are is listed on an exchange, is regis¬ credit weaknesses of a
particular
invested wisely to help finance tered with the SEC, or is out¬ borrower, it does
require advance
production, distribution and em-" standing-in large volume does not
planning of
\«ee
{
,
aim
is determined
by
to judge within a
point what market
success
ability
blush.
mechanism of private
has developed
i
Their
their
funds. I
new
who
us
private
attest that
of
and more to in¬
more
bankers
securities
they buy for as
short a time as possible before
they resell to ultimate buyers.
the
year.
prewar
the
end
at
roughly
or
of
billion
business threatened
working
capital to
below the minimum figure pro¬
vided in the indenture. The man¬
company's
a
case,
to
ensure
that
savings made
through institutions such as ours
fill part of the vacuum in
the
for instance, equity field. While there has been
unexpected downturn in
much
conversation
■
Hi
as
to
the*
Wii-t
,
•
Volume
COMMERCIAL
THE
Number 4742
168
&
FINANCIAL
CHRONICLE
(1565)
'
_■
somewhat larger share of
of
of
stocks,
common
likely
it seems
un¬
that
business
enterprise
any great expansion
ownership is to be ex¬
pected in the near future.
The exploring—and it may offer at
obstacles to the early passage of least partial solution to some of the
enabling legislation, particularly enigmas now facing our economy.
in New York State, would still be Of
one
thing I am convinced,
formidable
even
if
there were however, and that is that society
favor the
general agreement on this contro¬ will not indefinitely
versial subject.
private operation of life insur¬
in
such
It may well be, therefore,
instead some adaptation of
be
that
to
companies
we
continue
find
to
to put the savings entrusted
ways
worked
insurance
unless
ance
the
of private placements
out whereby life
mechanism
can
to
us
for
work
the
common
welfare.
can assume a
The Stock Market
Guide in
as a
drawn?
Managing Life Insurance Portfolios
V
(Continued from page 15)
It seems
long step to the conclusion
that,-. unlike a manufacturer of
buying securities directly from big
corporate
borrowers,
either as
washing
nies
aspects of your business.
not
a
individual
machines, for example,
you no long; can think of ways
to protect your companies from a
depression >■ without thinking of
Ways to protect the whole nation
from
it.
You
must
be
the
able
yoursso
na¬
How
identified with every
ests and those of the
country as a
indistinguishable. That
are
leads to my third question:
V "Can- you count on coming
through the next big depression in
this
country
unscathed behind
the buffers you have sought, as
you did the last one?"
The
amounted
to
force
no
in
than
more
and
some
ganizations,
of them are not
their
but
dealer
or-
in;
the
answer
rely
world.
Do the life insurance companies
continue to
posts.
It seems to your court j you have many expert financial
jester, however, that with 79% of, heads within your own organizathe families in the United States; tions.
Some* of you used to be
investment bankers and have lived
it down.
owning life insurance, with yourj
total assets well past the half-;
•
'With
mark on the road to $100 bil¬
lion, you must be approaching the
your? buying
whole
issues for groups of life
insurance companies, the question
time when you will feel a severe
depression—if we have one—both must arise whether such tactics,
way
investments and
as
to
the ability of the more
marginal individuals among your
enormously expanded number of
policyholders to continue to buy
and carry life insurance during
such a slump.
A straw pointing
your
respect
to
shutting out non-members of the
own
for your
portfolios except govern¬
bonds for which the earning
ment
of
on
to
1932, which saw the bottom
greatest depression, and
1942, which was for us the first
and blackest year of World War II.
Stock earnings yields are higher
now in relation to yields on high¬
est-grade, fully taxable corporate
bonds than they have been at any.
tax
the western prairies or in i the investment banking business
the stratosphere, you must pro-! on each new security? Two heads
ceed
without the aid of guide- j are better than one, but most of
as
Those two years
our
of all
Like
you,
asset
were
of
under
investment shock-absorb-; lose anything of real value when
other pioneers before: they do not get the judgment of
on
ers.
values than now.
buffer
this
have grown too big to
be
sell
to
relation to their
power
planet can help'
out of his own experience, to j
you,
failed
stocks
common
requiring
are
Obviously,! current easy profits of>their dealcrships to build up their plant and
personnel in anticipation of more
question whether you; competitive times to come,
the
on
one
to
seems
telling us that something is wrong.
Despite higher earnings and divi¬
dends in 1947 than in 1946, and
despite further gains thus far in
1948 over 1947, common stocks are
selling lower in relation to their
current earnings than in any pre¬
vious year in the last 20.
In only
two years since 1929 have leading
their dealers to use part of the
three-
the life insurance
fifths of all
market
stock
on
retaining
only
in force in the United States
ance
paper
power,
As of the end of 1940, life insur¬
0
the stock market help
can
anyone to answer such questions?
...
industry be¬
in. the first business
part of the nation that your inter¬
whole
compa¬
'•
prevented by the excess
profits tax and Section 102 from
were
retaining
have
might
which
earnings
in
substituted
accumula¬
individual
be
to
seems-
laws.
important
more
even
constitutes
us
because
me,
But
it
threat¬
to
it
you,
the
eoqnomic well-being
the country as a whole.
ens
How
it
is
possible
a
it is
of
have
to
a
scarcity of risk capital at the same
time
that
have
we
of
abundance
such
a
safety-first
Just
reduce
to
der
the
total
Westinghouse
"might-have
been" risk
capital.
We keep a
"taxable equivalent"
yield table
in front of us all the ime, to en¬
able
cannot
difference between
up
tell
to
us
some
liable
customers
to 75%
tax that a municipal bond
yielding 2% will give them just
as
much spendable income as a
common
stock
k;;'i;;C
yielding 8%.
;;Another partial
explanation
of
in¬
in the last two decades. The
come
chief
beneficiaries
farmers
and
/
have
been
labor.
organized
group has been a major
contributor to the supply of risk
for industry in the past,
though farmers are capitalists and
equity owners in their own farms.
capital
but
factors
least
not
which
among the
making buffer
are
available
see
any
capital and a dollar of safety-first
capital
as
the
money
passes
through his hands. The only thing
that distinguishes one from the
other in many cases is the state of
mind of their owners. Undoubtedly
group, eventually will bring couni ter regulations such as the com-
,
war.
scarce and high-priced is
increasing institutionalization
of the savings of the American
people. Unemployment insurance
is
idea
,
be
sharply reduced, particularly
the higher income brackets.
on
Dividends
hands
-the
in
could
taxation:
situation
exempted y from
Unfortunately the world
makes early important
reduction
difficult.
-which
duction
prudent individual used to antici¬
pate for himself.
All funds ac¬
cumulated by--the Federal Gov¬
ernment for that purpose are, of
invested
in
government
insurance
Life
bonds.
amount
to
premiums
that money is
of the
3.1%
invested.
in
the
be
telling
us
seems
two things:
First, there is an actual shortage
of risk capital as a result of a com¬
bination
of developments which
have tended to reduce the supply
the
increase
and
demand
the
at
time.
same
a
"haves" to any
Investment
(4)
bankers
and
might mak^ a more ag¬
gressive and intelligent effort to
dealers
persuade persons of small means,
particularly farmers and union
members, to invest part of their
savings in common stocks.
Such
program would
is here
be slow at best,
more
capital
risk
now.
Life
(5)
could
success
insurance companies
recognize that their veryin selling
themselves as*
the number
custodians of thd
one
savings of the American people
is going to compel them to assumea larger share of the risks of our
system of democratic capitalism.
Right
there seem to be.
why .the life insur¬
companies cannot or will not
many
ance
now
reasons
that
new
responsibility.
help of the life
insurance companies our approach,
to the problem reminds me of the
story of the two intoxicated men
lurching
down
a
fog-darkened
street in London, leaning on each
other for support, untif they came
to a' square in the center of which
without
Yet
was
substantial portion of
the risk capital that is in exist¬
ence, inadequate though it may be
Second,
maintain
significant extent would be politi¬
cal dynamite.
assume
thus
market
stock
:
re¬
while reducing;
the
on
Tax
would
revenues
the burden
na¬
Analysis of the current situation
stockholder's
be
and the need for
old-age pensions provide at
in part for needs that the
,
(3) Personal income taxes could
a
course,
peo¬
to save risk capital.
politically impossible
even if it were
economically feas¬
ible,which is doubtful.
/
The
the
least
that the
so
money
and
dollar
a
which
from
Neither
Last
and
prob¬
now
supply of risk capi¬
tal in the past would get a larger
proportion of the national income-
total'tax
national
it
to the nation's
redistribution
the
insurance
because
redistributed
tax
of
life
have
do
more
seeming dearth of risk capital
may be
found, in/.the extensive
our
tional income, and you know how
dollar of risk
a
mop
people
probably need it most,
those who
be
Unquestionably tax-exempt
bonds
socially
now
have
not
ple who have contributed the most
in 1941.
as
be
the
because
do
(2) The national income might
least
at
That would
who
before the
capital to
with the same physi¬
now
cal volume
takes
business.
undesirable
won't buy as much now as it did
working
more
operate
it
as
Life insurance companies
stop trying to expand their
could
ably ltfeed
estimated
Electric
that
week
75%
to
teller
bank
the
to
money
supply?
A
due
in
now
is increasing
requirements in or¬
reserve
business
rise
at
con¬
possibilities.
many aspects
we can, how¬
problem as
they are as follows:
(1)
the general price
level and the sharp and unex¬
pected increase in population in
recent years.
The President of
rapid
look
to
not to be
are
serious
as
the
ever,
super¬
that the government
bank
American
popular and
sidered
of
for
part
Persistent, large-scale liquida¬
tion of foreign holdings of bur
common
stocks
aggravated the
situation, as did the sharp in¬
crease in capital requirements of
last
33
»1
dwindling
Market Can Help
that subject yes¬
time, in two - decades excepting
terday, but have you considered
only 1941 and 1942 when the re¬
all of the possible long-run re¬
lationship was close to that now
sults of unlimited expansion of
prevailing.
private placement?
v,;/
1 Paradoxical though it may seem
Unquestionably, General Motors, to the finance officers
among you
Chrysler and Ford could have
who are struggling daily with the
made a great deal more money
problems of maintaining a reason¬
in the last two years by selling
able return
on
your
companies'
their automobiles directly to the
investments in what is still close
public instead of through dealers.
to the cheapest money market in
With the demand for automobiles
our history, the stock market gives
far in excess of the supply, the
many signs of an equity money
dealers have had to do no selling.
or
risk capital squeeze.
That is
But
the
big motor makers are
important to you because without
looking ahead to a time when they risk
capital or buffer money there
think
they will
need
selling would be no real bonds available
the ranks of private
cause
life; insurance
groups of such compa¬
You heard a remarkably
as
nies?"
tion's first economic statesmen in
to become
or
*
tions of risk capital.
Stock
How
higher in
•;
.
the risks servative policies leaving such
with ade¬ vacuums into which other organi¬
quate safeguards and higher in¬ zations less sound and other lead¬
less
terest returns.
It is a field worth ers
experienced
will
be
merits of life insurance ownership
""
■
the
statute
a
surrounded
by a
they
encountered that railing, our two
tipplers lelt new confidence. For
a weary mile or
two, during which
they circumnavigated the enclo¬
circular
iron
railing.
Once
large sums that ordinarily would
be
risk
capital are. acting like
petitive bidding requirements safety-first capital now because of for the job that lies ahead of us.
j aimed to break up what were al¬ the pessimism of their owners. could be brought out of hiding if
sure many
times, they continued
leged to be exclusive arrangements Why are their owners pessimistic? given adequate incentives.
to stagger along, clinging to the
in the investment banking busi- There is a widespread belief in
The first point has to do directly
railing for support as needed.
in that direction is the fact that j ness itself. The American people,
the
a
postwar with the investment policies of
inevitability of
Finally, sensing that something
the average ordinary life insur-on the record, seem to feel that
slump. There is a great deal of the life insurance companies of was
wrong, the least intoxicated
ance policy in force now is slightly
j if they must choose between max- reverence for historical highs de¬ the United States, and the second of the
pair turned to his fellow
smaller than it was in 1900, not- j imum efficiency and competition,
spite
changed
yardsticks.
War with their relations with their and said:
"My God, there must be
withstanding the great increase in they will favor competition. That fears are widespread. So is worry policyholder and the public. Un¬
some way out!"
average incomes since that time. is a natural extension of the prin¬ over high pay points.
those
investment
There is questionably
Weeks ago, when I was first
It seems likely that the salesmen ciple of democracy in government.
apprehension that our free enter¬ policies are contributing to our
who sold the insurance that cov¬ In theory, the ideal government is prise system may not survive an¬ present scarcity of risk capital by struggling with the subject of the
with the other depression. We had enough removing an increasingly large stock market as a guide in man¬
ered one-tenth of the population an absolute monarchy
life
insurance
company
in
1897 chose
the most likely best man in the country as the experience
with rationing
and share of the national savings from aging
prospects for their wares.
Now absolute monarch. But our nation price-fixing during the war to all possibility of becoming risk portfolios I considered talking;
with you about some of the meth¬
that half the population is
in¬ is dedicated to the proposition learn that under such regulations
capital, no matter how great the ods we use to detect deterioration
sured, your salesmen must have that the average man will be bet¬ the value of a common stock be¬
ter off in the long run if we keep
inducement.
The
dilemma
in in common stocks, which are the
had to seek more marginal clients
comes
a
political rather than an
j
all
than before.
-
>
to
By'emphasizing your identifica¬
roads
that
open.
We
proposition
are
even
sticking
in Ger¬
welfare of the coun¬
My fifth question is, "Are you
whole I hope to forestall
the charge that anything I say doing your full job?"
Should you aim to do more for
today suggests abandonment of
sound business practices pro bono all policyholders, or any of them,
publico.
If I should die tomor¬ than rent safely the dollars en¬
row, life insurance would be the trusted to
your care, regardless of
biggest single asset in my estate,
what they will buy? As the cus¬
and I do not want its safety jeop¬
ardized by any starry-eyed no¬ todian of the principal investment
as
tions
a
about
for-all.
all-for-one
What I
am
and
one-
of
trying to sug¬
do
gest is that your growth together
with changed conditions in the
United States,
new
may
you
have made a
your
policyholders
have
been
giving them
re¬
um,
.
well
Nature abhors
a
vacu¬
in politics and economics as
as
in
physics. Are
your con¬
finds
it wants to buy for investment are
are
and imponderable.
tangible factors con¬
tributing to our risk capital short¬
good
no
The
always
great
has
bulk of risk capital
been
supplied
by
those who could
that
afford to take
Many
years
? reasonable
a
risk capital,
or
while the supply of that risk capi¬
being reduced to
no
incon¬
siderable extent by the insurance
industry's
success
in
selling
a
is,
of successive increases
larger
larger
and
the American
that
be
public
on
the idea
life insurance policy should
a
the
first,
and
is the most de¬
sirable, of all forms of savings.
new
low
the
ability
dividuals to create risk capital. At
the
very
taxes
time individual income
were
highest,
has affected appreci¬
ably the market value of the se¬
curities.
I tried
on
of
corporations
To
your
Solutions
one
wealthiest
ment
deal
was
of
some
the
men
I know.
that he had
money
making
sure
of my
and
His
seen
com¬
good
a
lost by efforts to-
things before
of the big
The big problem
ones.
here
to-
seems
be where and how to find
an
ade¬
quate supply of risk capital quick¬
ly at
so
a
time when
failure
In
to
do
threatens to choke off the capi¬
expansion that has been
taining business the last two
court jester only five
ideas
shrewdest
be right on the little
tal
Suggested
of in¬
bonds, before that de¬
terioration
of
proportion
personal income taxes reduced
a
buffers for
a
by those in the
higher income brackets. The only
other comparable source has been
retained earnings of corporations.
chance,
without
margin of buffer
tal is
age?
to
interests?
Shortage
considerations
osychological,
in
contrary to their investment
Capital
such
What are the
garding developments in the na¬
but vital to
your continued well-being.
Your court jester's fourth ques¬
owe
information and advice than
Risk
But
tion
investment outlook not only
'Row far should you go in
you
more
good business for you
tion is,
large part of the population,
a
which the insurance industry
question.
itself is that the evidences of debt
many.
tion with the
try
economic
sus¬
years.
solving that problem the lead¬
possible solutions suggests them¬
ership of the greatest business la
selves.
the world is urgently needed.
Most
of
them
would
not
,
34
(1566)
THE
professional ;trader
ities,
&
(Continued from
all.
He
his
own,
has
as
state which is
ferings must be long stock.
Short stock
By WALTER WHYTE=
society in action is
It does not exist for in¬
dividual' citizens; individual citi¬
"J"
exist
zens
only be sold
can
nation
11)
page
rights or will of
against society. The
supreme.
H*
CHRONICLE
no
Because of SEC rules such of¬
Whyte
FINANCIAL
Thursday, October 14, 1948
States of the® Nation's Business
s
may
Says—
=
is
take advantage of
such a public psychology by
offering stocks at the market.
Markets
Walter
who
public's procliv¬
of the
aware
Tomorrow's
COMMERCIAL
for
the
state.
The
state is
a corporate
being through
which the total will of society is
cannot
midst
of
flicts
in
prosper
industrial
between
the
and
spread around which there
was
Con¬
circle
happy
labor
strife.
capital
people.
are a
species of war and war is
always costly. Strikes and lock¬
outs
loss
mean
decreased
of
working days,
profit and
and
wages
reduced
output for consumers. If
private industry is to demonstrate
its
effectiveness in
the
future,
of
well-fed
Each
and
a
again had the
man
kind of a spoon strapped to
the inside of his arm in the same
same
But here the
way.
different.
Each
situation
was
feeding
was
his
opposite neighbor."
That
is
the
spirit that must
long stock is disposed of, expressed. The head of the state
characterize the nations, if they
labor and management must work
whether
today short stock is sold on
he
is
called
Der
are
ever
to
develop ways and
market in a precipitous posi¬ a rising market. But there is Feuhrer or II Duce—has absolute together, not against each other.
means
of
living peaceably
to¬
authority both legally and ethi¬
(3) Revitalization of small and
tion where news might start nothing
to prevent selling
gether in one world.
cally. His policies, he holds, are medium-size
undertakings.
Big
To put this philosophy into ef¬
sharp break. Stops now more against long positions.
I!m not his
Continued
dullness
after
places
so
—
they are state policies
the state, by the
own;
important than
merely pointing out the addi¬
ever.
Last week's column said in
effect that the next few days
would
point to the immediate
path of the stock market. Ap¬
parently I was too optimistic.
The way the market is moving
it looks like it may take weeks
—policies
tional factors in
state
ket that
not
are
down
a
mar¬
*
*
to
it
gets
All this leads to the
premise
that the
possibilities of
decline
are
a new
such
decline
a
*
Si«
*
we'll be
of vari¬
sorts with the tape veer¬
ous
direction of the
in the
it
Super¬
this will be the
political campaign which is
gathering heat even though
news
as
imposed
the
happens.
on
race seems
all
but the
over
It is apparent that
shouting.
the market, or
rather the
peo¬
without
the
can
the
carry
down to about 170
averages
From present signs
in for a news deluge
ing
increasing
up
point.
real damage to
any
major
Still
picture.
I
don't look forward to such
break with any
It is
a
complacency.
something I'd rather let
the other guy
sit through. ~If
there is to be any support at
that
figure, I'd prefer to be
long of cash and start
my
buy¬
ing when, as and if, the
ple With enough money to in¬
port develops.
fluence
minor
trends, will
sup¬
cerns.
act-ion
So
*
*
leaves
This
and file
only the rank
The
average
public buyer of stocks is sel¬
dom interested in market
ac¬
tion of the future unless im¬
mediate
action
such
is
as
to
give him hopes of rapid ris£s
almost at
A
once.
sleepy tape,
though stocks
even
are
on
He's bullish
only when
the market is active and ris¬
Same thing applies to
ing.
down
additional factors that
:
between
Allegheny
29
and
30.
Stop it at 30; American Air¬
17, should be stopped at 15.
Suggestion
oils
on
,
More next
*
(see last
views
[The
article
time
do
not
coincide
Chronicle.
those
in
expressed
They
this
at any
those
with
of the
presented as
are
of the author only.]
United
*
becomes
a
&
Opens
^©iW'Jias been formed with
at
Street to
sees
potential seller.
230
A
South
Broadalbin
in the securities
engage
business.
dull, uninteresting market,
States
Partners
are
I.
A.
Mc¬
Dowell, Katherine M. Buike, and
Donald
R.
tions joined
Catt.
Pacific Coast
Buckley Brothers,
Beverly Drive.
He
resident
Exchange
San
Francisco
Stock
(Associate)
Exchange
The
Financial
BEVERLY HILLS,
A.
Zimmerman
with
iated
Members
New York Curb Exchange
for
Chronicle)
Union
has become affil¬
Marshall
Co., 9441 Wilshire Boulevard.
was
&
He
previously with Weeden & Co.
Chicago Board of Trade
14 Wall Street
OOrtlandt
7-4150
New York 5, N. Y.
Teletype NY 1-028
Private Wires to Principal Offices
Saa Francisco—-Santa
Barbara
Monterey—-Oakland—Sacramento
Fresno
L. V. Shaw
V.
Shaw is engaging in a
securities business from offices on
,
Opens
FALMOUTH* FORESIDE, ME.—
Leigh
Edgewater Road.
at opposite
were
the
represents
way
of
communism and the United States
represents the way of private cap¬
italism—two ways of life which
diametrically opposed to each
are
other and which Marx and Lenin
held could not
together
in
of
ways
world.
same
between
life
bound to
amicably get along
the
show-down
A
these
sooner
two
later is
as if at
or
It looks
come.
present it will come
than later.
con¬
medium-sized
medium-
and
sooner
rather
have
concerns
increasingly
they have received In the recent
past. They need opportunity to re¬
assert themselves, to obtain ade¬
quate capital, to play again their
part. Except for the few at the
top,
big
business J offers
men
dependence—a chance to become
and
wage-earners
workers.
salaried
and
medium-size
Small
business offers
independence
men
chance to become
—a
owners
and
proprietors.
(4)
In
taxation.
"The power of tax,"
as
a
dis¬
tinguished judge remarked a long
time ago, "is the power to de¬
stroy." Business is willing to bear
its just share of the tax burden.
It
desires
What
it
no
therefrom.
escape
demands
is
chance to acumulate
equity,
reserves
is to do so, the present tax
system, local, state and national,
must be carefully readjusted
at
many points. Otherwise, individ¬
ual initiative and venture capital
dictator-successor of Czar Nicholas
it
II.
Communism,
He
fully
revolution to
world
without delay
expected
occur
a
revolution in which the work¬
—a
ing classes in capitalistic countries
everywhere would
arise
and
would
take
over
established
to
in
he
reason
set
or
similar
ernments
up
the
Russia.
did
gov¬
one
call
not
he
For
his
be
taxed
out
existence
of
altogether.
(5) Restoration of competition.
Monopoly, whether national or in¬
ternational, cannot be allowed to
go its own way. Control is essen¬
tial. Competition is the life not
only of trade but also of produc¬
tion.
It
weeds
out
unfit.
the
It
country
the United Provinces of
Russia or simply Russia; he called
stimulates and brings out the best
in men as well as in corporations
it
which
the
Union
of
Socialist
Soviet
Republics. He envisaged
attract
world¬
which would
to itself one
nation
after
organization
a
another.
That conception of things has not
changed. It has persisted among
Russian leaders ever snce the days
of
Lenin.
Hence, to survive the
march from Moscow, the United
States is compelled to act, to take
the initiative, to go on the offen¬
are
run
by
Where the
men.
economies of monoply are evident
and
greater than those of com¬
petition, monoply should be rec¬
are
ognized but should be made sub¬
ject to thorough regulation.
Ill
The
state
of
the
nation's
busi¬
will
States
have
in
par¬
sacrifice
to
to
extent its preferred position.
under a unified world
some
It
United
the
ticular
cannot
order forever retain the economic
superiority which it possesses at
present. When and if atomic en¬
ergy
is converted to industrial
uses, the backward areas of the
earth, blessed as so many of them
are
by
abundant
natural
re¬
sources, will surge forward; they
will
industrialized.
become
means
ducers
of
will
they
and
appear
industrial
that
petitors
the
pro¬
commodities
they will become
of
That
as
United
com¬
States
in
the markets of the world. Exports
and
will
imports
flow
in
Neither
States
revived Great Britain
nor a
be
able to
the
many
directions.
remain
United
dominant
exporting nations and control
as
the
facilities
international
of
fi¬
and
shipping. They will be
compelled to cooperate with other
nance
countries
and
vantages
share
to
and
their
ad¬
with
know-how
other countries.
a
for
expansion,
an
opportunity
to
prove its continued usefulness. If
may
fect,
will
Readjustment
founded the
new Russian Empire on the ruins
of the old, he became at. once the
But
this
possible
of
economy
shift in
world does
the
the
not
necessarily signify that the United
will drop to the plane of
a second-rate power.
It does sig¬
nify that tariff policies and atti¬
States
tudes toward international invest¬
ments
will
Tariff
walls
have
be
to
will
reversed.
have
to
down. It will be necessary
to widen and deepen the
trade.
come
greatly
flow of
Things
which we cannot
economically
will
in¬
produce
creasingly
from
come
other
this
to
country
countries
and things
this country to other
countries which they cannot pro¬
duce
economically. The variety
will go from
arid abundance of
consumer goods
tremendously increased
for peoples everywhere. The law
of comparative advantage which
has played such a prominent part
will
be
international
in
will
tions
economic
continue
rela¬
to
apply but
it
will
apply without artificial
restraints,
without
self-seeking
agreements as to national quotas
and
without national
maintain certain
subsidies to
industries which
ness
is
only that of private
capitalism, but also that of pre¬
ferred position. The responsibility
could not otherwise exist.
for
the
the
the
world rests upon the shoulders of
out
becoming the victims
glittering promises and
glowing benefits which the Com¬
the
particular
munist International holds out to
infirmities
fear-ridden and fam¬
ishing peoples not only in Europe
and Asia, but also in other parts
they
they
of the world.
they
move
itself
quickly in order to
the
and
other
democ¬
racies from
the
of
frustrated,
other major line of action
the United
States is re¬
quired to take is to strengthen the
system of private enterprise. To
achieve this end, I would like to
suggest a minimum program of
five principal points and I would
like
to
made
all
or
that
urge
at
as
grams,
once
to
many as
a beginning be
put into effect
possible of these
processes
of
-and
new
pro¬
products.
its
growth. Private capitalism
may be mature but its tasks are
not
is
ended.
not
The
over.
We
age
of
have
conquest
not
done
everything that is to be done.
While the future may be uncer¬
tain. it will present us with more
challenging
either
opportunities
than
(the present
or the past.
America's quest for a better orderof things has only just begun.
(2)
Reorganization
of labormanagement
relationships;
The
not
reconstruction
United
States
of
the
and
other
strong nations. Unless the strong
nations
what
are
willing
are
of
the
to
bear
weak,
the
unless
prepared to give of what
instead of grabbing
possess
they
The
of
of the
wars
wars
past—most of
of the past—have arisen
the
preferred positions of
nations. England, be¬
ginning
in
the
sixteenth
and
seventeenth centuries and fully
developing in the eigtheenth cen¬
tury, set the pattern. When Eng¬
land claimed
new
either by
areas
get, and unless
ready to feed each other
right of discovery or.by right of
conquest,
i?
proceeded
to
rather than to feed
upon
each
other, the hope of a just and last¬
ing peace which has appeared in
the heart's of millions of people
in all parts of the world may be
converted into despair. Let me il¬
lustrate what I mean by a parable
—a parable taken from Otto Tod
Mallory's book, "Economic Union
colonize these areas. It gathered
together the raw materials there¬
from,
shipped them in British
bottoms to its island home,
fi¬
are
can
and Durable Peace:"
"Once
Recognition
America has not reached the end
of
CAL.—Philip
Maxwell,
na¬
points:
With Maxwell, Marshall
to
the
poles in their ideologies, in their
(1)
Exchanges
Stork
manager
John B. Dunbar & Co.
*'
York
321
was
on
Schwabacher & Co.
New
Chronicle)
with
South
(Special
.
Financial
HILLS, CAL.—Ralph
L. Dofflemyre has become associ¬
formerly
Orders Executed
The
BEVERLY
ated
Securities
to
is
forms of government and in their
notions of democracy.
The Soviet
The
Dofflemyre With Buckley
(Special
America
each other to defeat
Hitlerism, they
which
Pacific Coast
of
Hemisphere. While these
ern
save
offices
to
Soviet
most powerful nation in the West¬
sive—to
I. A. McDowell Co.
The
communist
Whyte
necessarily
Soviet Union
world.
inevitably
applies.
—Walter
the
of
the
Union is the most powerful nation
of the Eastern Hemisphere. The
wide
Thursday.
and
Small
found the going rough. They are
entitled to better treatment than
drive
dominate
this
16 and
medium-size
or
Small
concerns.
the
had
week's column) still
are
small
competition
sized
and
Loew's, between
lines
necessary The first
major
unfair
of these lines of action is to check
lines between 7^-8, stop at 6;
ell
*
#
A holder of stocks who
a
Ludlum
have
ALBANY, ORE.—I. A. McDow¬
enter into it.
..
You
ment.
markets, except there
are two
.
I
add to last week's state¬
can
a
bargain counter, leaves him
*cold.
There's- nothing
position.
*
(you apd me) to make
market.
our
v
anything out of this dull leth¬
argic
back to
now we come
two
in
ways
with
socialism,
When Lenin, the father of Rus¬
stick to the sidelines awaiting
:,
own
private capitalism is to pre¬
vail over fascism, communism and
sian
developments.v
cannot be permitted to pursue its
If
of
with
enough
every day the market does
strength to set up, not even
nothing. In the Dow figures
mentioning strength enough
before
and for the state.
business, which is getting bigger
all the time, has~ its
place, but it
state
present in a
rising market.
■*
of
can
upon
citizen
a
time
died
and
an
Ameri¬
went
to
Heaven. Before settling down he
asked to be allowed to
satisfy his
curiosity
concerning
Hell.
His
request was granted. He found
there a circle of hungry-looking
cadaverous
individuals
around
a
the-transactions
nanced
by Bjit-^
ish capital and transformed them
finished
into
products. Then it
turned right around and shipped
the finished products back for sale
to the colonies, again in British
ships
and
capital
and
financed
by
retained
for
British
itself
whatever manufacturing,
shipping
and other profits that • could be
realized
therefrom.
Along with
these activities, it organized colo¬
nial governments, directed colo¬
nial affairs from London and as-^
huge banquet table spread with a sumed what it was pleased to call
white
man's
burden"
of
great feast. Each man there had "the
a long metal spoon strapped to the
civilizing backward peoples. Other
inside of his arm, like a splint, so nations followed the same pat¬
that he could not bend his elbow. tern. But' the pattern 'no longer
No one could feed himself. There possesses, potency. It is outmoded.
they sat, hungry and disconsolate.
On
his
return
to
Heaven, he
found another delicious banquet
No nation will be able to exploit
backward regions or
in
*
the:
future,
the
other nation's
charges of
nations
imperialism against the United
the international wreck¬
ing crew of Molotof, Gromyko,
and
Vishinsky to the contrary
notwithstanding.
United
a
creditor nation. It
do the
things it
to receive
a
and
of
it must change its
notions concerning foreign trade.
It sells from 87 to 90% of its out-
a
voted
and
problems
reciprocal
of free trade
trade agree¬
ments.
(Continued from
to force annual
CHRONICLE
dition
4)
page
distributions of
a
company's earnings.
Dividend
the
Moreover,
in the dollar amounts of dividend
payments is
undoubtedly
favorable
the
the
Under
income
Revenue
Act
to
due
of
1948,
subjecting such income to the
of
burden
excessive
of
state
the
nation's busi¬
then, is the state of price in¬
It is the state of private
ness,
flation.
capitalism. It is the state of pre¬
ferred position. Are we ready and
willing to pay the price of pre¬
serving and further improving the
of the nation's business? If
state
we
not
are
of
ready and willing to
the price therefor, the right
peoples to govern them¬
pay
free
selves and to live peaceably
the law may
national economy.
wife
and
band
in
results
disappear; the ways
known
port-minded rather than importminded.
We have
accepted the
exist;
more.
we
may
know
The world may return
policy of shipping out but not the
policy of shipping in. Indeed we
of the
era
have erected tariff walls designed
darkness
goods from
other
coming in. We have adhered to
the old mercantilistic notion that
no
to another
Ages—an
era
by
unsurpassed
in the history
era
kind.
Dark
have
of
any
of man¬
:^V-V ;IT.'7. 7>7£
'■■■'}
tax
60%.
at
effective
an
1948
It is
of dividends which
shareholder keeps after taxes
is important.
a
The correct
a
that
answer
^
to the
the shape of things to come.
not
dividend
policy that
is
counts
much
so
(Continued from
conferences
as
the
economic
help to shape divi¬
dend
policy.
Foremost
among
such predominating forces is that
of inflation, whose pressure is be¬
so?
Here is
a
plain
no
members that
Association
proof."
Doesn't
idated in the
the
on
size of
mere
the
,
author
know
that
proceeding of which
holding in effect
the
NASD
to its
suspect and must bear the
-
no wrong
a
implication
we
was
inval¬
speak, the Commission
inferences may be drawn from
markup and that the burden of proof is
when
it
charges contravention of fair and
equitable principles of trade and not
To the author's claim,
.
.
declared :*
has
parently, therefore, quite correct¬
1939 dollars.
AS
example,
Genera
Motors has reported earnings at
the rate of approximately $10 pershare.
It usually sells about 12
times earnings.
Its present price,
however, is around 60, that is, 12
times its earnings in 1939 dollars.
This will, morever, be found to
be correct if we compare the 1939
Dow-Jones averages and earn¬
excellent
of
for 30 stocks'with those
the present."
ings
If
consider
we
the
depreciated one-half in pur¬
chasing power, we should not be
deluded
earnings.
the Association has used that
apparent rise ir\
General
Motors
is expected to
by the
The
dividend
for
1948
with infinite restraint and tact, concerning itself with
come
now
to
in
crass
Department of Commerce figures,
stupidity this stands out. On every hand prices have in¬
creased. Rent, the cost of office help, all other items
making operation possible have increased in price. Ex¬
change commissions have soared. Why is the over-thecounter dealer made an exception?
Is it because of a
planned effort to exterminate the little fellow? Because
this can have far-reaching repercussions, can backfire,
is
utterly unjust, all those in the securities field,
right of the over-the-counter dealer to
must not be
securities
impaired, while at the
industry
abreast of the
any
are
same
a
livelihood
time others in the
permitted privileges which keep them
changes in
our economy.
The SEC and the NASD would do well to re-examine the
5% yardstick. They owe
Making fish of
lated
to
one
receive
years
a
duty to the industry of abolition.
sector and fowl of the other is not calcu¬
popular approval.
interest."
.--V
It contravenes public
.
T
to 1941
there
was
over
earnings
years
1930 to, 1938.
an
excess,
of dividends
during
the
lean
Most corpo¬
rations in recent prosperous years
are
making
earned
reserves
source
the
up
surplus
and
which
were
invasion
of
depreciation
used
of dividends. The
as
the
prospect
a
by
corporations
encouraging.
more
generally is
In the long run,
V
not
-
,<
earnings rather
than dividends exert
fluence in
earnings
and
Louis Seaverns Now
ChrontclS)
MO.—Christ¬
opher T. G. Manners, Fred J.
Twilling and Robert M. Twilling
have become associated with Mc¬
Donald
more
&
Company,
Avenue.
Mr.
R. E. Petersen
(Special
ifh
Barclay Inv. Bo.
(Special
to
The
Financial
CHICAGO,
Seaverns
with
ILL.
has
1009
Balti¬
Manners
was
South
La
was
Hammill
was
&
Street.
&
Co.
Co.
and
In
Chronicle)
business from offices at 180 North
Louis
C
Adams
Co.,
Mr.
Avenue.
39
Joins
Sea¬
Shearson,
the
he
past
partner of Abbott, Proctor
& Paine.
a
Herrick, Waddell
(Special
formerly with Wilson,
McMaster
Opens
Financial
The
associated
Investment
Salle
to
BERLIN, WIS.—Ralph E. Peter¬
sen
is ' engaging
in a securities
Chronicle)
—
become
Barclay
verns
ST.
zer
The
Financial
Chronicle)
LOUIS, MO.—John S. Kil-
has
rick,
to
joined
Waddell
Locust
the
&
staff
Reed,
.77: v
Street.
of
Her¬
Inc.,
Y7
418
,
Observations
(Continued from page 5)
under-valuation would
a
potent in¬
determining the market
value of stocks.
ket may tend to
While the
mar¬
ignore historically
high corporate earnings, this
con¬
*
Allen M. Bernstein, "The Fal¬
lacy
of
Equities
as
a
Hedge
Against Inflation," "Commercial
& Financial Chronicle,X Aug. 19,
1948. -7
,
U
be
confirmed,
in
as
'
1941-'42, by noting "the
public's indiscriminate liquidation after the outbreak of war without
logical calculation of the impact of war and inflation on
equities,
generally or on. specific issues or as compared with the alternative
choice of
holding
Applied to
money.
stock group, such opportunity for
taking advantage
of recognition of the
public's fallacies, has been continually offered
in
a
public utility company shares. Formerly
during the speculation1920s the mere device of throwing
operating companies
a
holding entity was paid for by high market premiums; and the
greater the pyramidings, on up to the third and fourth
degrees, the
higher were the premiums—usually inflated in geometric
progression
eagerly paid by the public. Now conversely, in the
atmosphere of
investor depression prejudice
against the formation of a mere one-
degree management holding company- (with its
honesty enhanced by
SEC supervision), -is the
prima facie reason for the public's pricing
its constituent operating units at a
sizable discount in lieu of the
premium
of
behavior
should
investor
in
f!
the
his
earlier
period.
in
earlier
the
appraisal
of
Realization
period
have
over-valuation,
of
the
public's
reinforced
as
supplies
it
illogical
the
realistic
conversely
under-valuation of
now
the welcome reason for the market's
these securities which he
may have discerned from appraisal factors.
Diversification
-
-
•
Diversification, always the desirable keystone of practical invest-
ment
policy, under the host of economic
imminent in
The
the
logical
answer
we
are
and political imponderables
post-election world, is now all the more important.
investor must assume that he, at
least, does not know
our
to
the
endlessly raging public argument as to whether
or peace,
or in any case inflation or: deflation.
betting on either alternative, he must hedge against them.
facing
Thus
war
he will place part of his funds in
fixed-interest securities
(bonds) to maintain his principal and income against future deflation
or
depression, and part in equities (common stocks) to help the
maintenance of his position in the event of
inflation, dollar-depre¬
ciation, or/and business boom. Such diversification between fixedinterest
among
less
and equity securities must be
supplemented by distribution
different industries to hedge against elements like more
or,,
government
encroachment,
rising
or
falling
wages
and
other'
costs, and even against the unpredictable actual effects of war on
specific businesses. We saw that the actual impact of World War II
on different industries in most
cases contradicted the wealth of
vious
pre¬
predictions—the
stocks of aircraft
manufacturing companies,
industry, perversely went down during most of the
period, while the long-abused railroads were given a fillip which
is still unexpectedly booming them.
armament
an
In
addition
to
diversifying
for
money—possibly in real
owned
securities, the manager of
different kinds of outlets
perhaps even in privately-
among
capital should distribute his funds
estate
among
and
business ventures.
The
Long-Term Record of Price Irregularity
The need for diversification is clearly demonstrated by the mar¬
ket's long-term record of
selectivity in peace as well as in wartime.
Despite the major decline by more than one-half of the Dow-Jones
Average of industrial shares since its 1929 all-time peak, nevertheless
V1
about
200
listed
companies are selling above their highs of 1929;
higher than both 1929 and 1937; and for the period
since V-J day the market shows a
completely heterogeneous mixture
about 150
are
now
simultaneous net advances
of
and declines.
Even within industries,
examples of contrary price behavior during the past two
years, thatl, in chemicals Union Carbide has risen while duPont has
declined; Standard of New Jersey and Pure Oil have advanced while
we
liberal dividend ratio
for
too
big and little alike, will be out of sympathy with
such attempt.
The
10
shows a
ratio of 85% of earnings were paid
out
as
dividends. According to
the persistence of the NASD
continuing to adhere to the "5% yardstick." Of all
and
for
for the
requests that names be not published.
We
share
both
Financial
CITY,
Inc.
amount to
$4 compared to $3 per
1947.
In
1946, labor
the spirit of the law, rather than its letter," we say hooey; troubles unfavorably affected its
earnings, so that the dividend pay¬
rather has it been used as a club of subjugation which was ments were a
high percentage of
its profits.
Over the period 1941
never duly authorized in the first instance.
This self-assumed
to 1947, General Motors increased
power has created an unhealthy condition of fear of reprisal the equity for its common stock
which accounts for the many anonymous letters we receive, from $20.46 to $27.78 while dis¬
bursing 50% or more of net in¬
and where communications are signed for the numerous come in cash dividends. Its record
power
as
ig¬
The
to
previously with Goffe & Carkener,
Instead of
dollar
1939
has
the respondent?
upon
He
approximately
public, but it has implied that any
was
values.,
ly capitalized present earnings in
they could not make more than 5% markup
markup above that figure
burden of
(NASD) said
to
(Special
KANSAS
into
"The investment expert has ap¬
an
transaction with the
a
on
stock
us:
has the
time
3)
where silence bespeaks guilt.
case
The article tells
"At
page
is
McDonald
bubbling
economist,
analyzing
comparative
statistics,
has
re¬
cently pointed out the effect of
the shrinkage
of the dollar on
held, wouldn't it be simple to just say
were
earnings
value
prices.
which
forces
One
no
distorted
-
ing held precariously in check.
The Five Percent Yardstick
has
prob¬
lem, it is submitted, will explain
not only the price of movement
of stocks in the past two years,
but
replaced
of
that divi¬
say
With
Company
favorable and not
a
retarding influence.
It
Three
'&
Hence, taxes would
to exert
seem
of
rate
Act, this rate is 44%.
the amount
have
sub¬
a
under the.
By comparison,
economy
the impact of inflation which
nore
to middle-bracket
upper-bracket taxpayers. Un¬
come
sig-^-
rates.
tax
prior law, a married person
with two dependents, who earned
a net income of $90,000,
paid in¬
under
of democracy may cease to
and
the
civilization
we
ex¬
35
Guide to Stock]Price
as
temporary
inflated
present
determinant
a
Splitting of income between hus¬
stantial saving
only
shrinkage. To
dends
factor.
tax
embodying provisions for splitting
net income, greater distributions
of dividends may be made with¬
out
the
dollar
increase
recent
has
interpret earnings in the light of
Enlarges
Payments
der
The
(1567)
nificance. Those who take account
of
Reduction
Tax
and
iv
produce only at high costs,
imports of things which we
must have to fill in the gaps in
keep
to
of
and
and
to
expense.
our
attention will have to be de¬
more
we can
specifically
at
tective tariffs will have to go
we
always been
an
themselves
sent to other countries
for good. We are to
extent the poorer. So if we
to better ourselves by
our
have
of
unfavor¬
trade which can
to
result of these changes, pro¬
are
we
or
rich
are gone
But
debtor
As
much receive some¬
thing in return. That something is
imports— imports of things which
we cannot produce at all or which
our
a
only by increased ship¬
ments of goods to us. Otherwise,
we permit other countries to en¬
These articles represent
things which come from our farms,
our
forests, our mines and our
supply of natural resources. When
are
we were
be settled
goods.
exports,
balance
able
in the domestic market and
exports the other 10 to 13%, but
what it exports is nevertheless of
strategic importance. In spite of
the present demand for food ship¬
ments to Europe, our exports con%
sist largely of machinery, equip¬
ment and other forms of capital
that
exports,
over
~put
.
arrangement
this
Hence, it is necessary to reverse
process
and to adjust our¬
selves to
an
excess
of imports
commitments,
they
they
While
sound when
FINANCIAL
Earnings Versus Dividends
the
further
make
excess
nation, it becomes unsound when
we develop into a creditor nation.
longer
its invest¬
on
gold.
was
&
favorable
a
by an
imports with the
receipt of the excess in the form
did. If it is
once
return
abroad
ments
no
can
by
or
of exports over
has become
States
rich
get
balance of trade
States by
The
COMMERCIAL
THE
Number 4742
168
Volume
see
as
Texas Co. has declined; among the retailers
Montgomery Ward and
May have fallen substantially while Sears and Kress are practically
unchanged, and among the steels Jones and Laughlin has declined
sharply, U. S. Steel fell slightly, Bethlehem remained unchanged,
while Youngstown has risen by 15%.
Only diversification,
with careful analysis on the above-outlined value
basis,
advance take care of the factors which
habitually result
together
can
inin such-
irregular price performance.
All
the
trate
on
courses
news
or
under our prospects for even greater political
complexity, does it behoove the investor to concen¬
more
and economic
logical
realistic
policies,
in
lieu
of following easier
whole, by chasing the
by assuming future trends from its past performance.
like forecasting "the market"
4
).
i
>
1
»
f
as
a
'
36
(1568)
THE
COMMERCIAL
&
FINANCIAL
following Statistical tabulations
shown in first column
are
cover
production and other figures for the latest week
either for the week
or
month ended
on
Latest
IRON
Indicated
AND
Month
Week
STEEL INSTITUTE:
Previous
Week
that date,
operations
(percent of capacity)
Oct. 17
Ago
98.5
97.5
Oct. 17
1,775,400
1,757,400
AMERICAN
1,753,200
Crude
1,693,900
zinc
Kerosene
oil
Gas
output
(bbls.)
distillate
and
Oct.
2
Oct.
2
—Oct.
2
Oct.
(bbls.)
2
—
oil
fuel
output (bbls.)
Oct.
2
fuel oil output (bbls.)
Oct.
Stocks at refineries, at bulk terminals, in transit and in pipe lines—
Finished and unfinished gasoline (bbls.) at.
Oct.
Kerosene (bbls.) at
Oct.
2
Residual
Gas
oil
distillate
and
Residual
oil
fuel
oil
fuel
(bbls.)
(bbls.)
at—
2
2
Oct.
:
$5,343,100
5,531,450
§4,789,000
§15,100,000
5,506,000
16,458,000
2
§79,252,000
§26,048,000
§63,529,000
§37,498,000
at
§2,194,000
5,207,550
1,981,000
§5.997,000
Unfilled
CIVIL
2,071,000
freight
Revenue
freight rec'd from connections
loaded
(number of
§78,669,000
94,893,000
81,607,000
§25,055,000
§61,884,000
23,721,000
68,969,000
22,778,000
State
60,223,000
'vy.t'»V'
ENGINEERING
CIVIL
-1, /•' ' '
"•
§37,326,000
72,308,000
Total
U.
S.
CONSTRUCTION
2
908,581
907,971
895,279
942,455
2
726,859
715,334
698,000
735,864
—
•'
U.
ENGINEERING
Private
State
and
$170,200,000
$128,139,000
$106,894,000
$92,983,000
Oct.
Federal
7
101,031,000
59,530,000
33,177,000
OUTPUT
Bituminous
(U. S.
7
69,169,000
68,609,000
73,717,000
48,164,000
Oct.
7
61,253,000
48,020,000
56,434,000
7
7,916,000
20,589,000
17,283,000
and
SALES
40,041,000
50,540,000
5,005,000
53,450,000
52,381,000
*5,121,000
5,158,000
604,000
615,900
593,600
(net
(net
tons)—_
tons)
tons)—
(net
coke
Aug.:'
of
v-*
of month (net
tons)
2
11,645,000
11,840,000
11,980,000
OF
RESERVE
12,254,000
—Oct.
2
1,233,000
1,200,000
1,162,000
1,293,000
^Oct.
2
146,000
*145,500
149,300
138,500
si
INDEX—FEDERAL
RESERVE
SYSTEM—Estimated
in millions
Oct.
327
*319
303
of Aug.
as
INDUSTRIAL)—DUN
AND
&
BRAD
COMPOSITE
5,166,126
5,448,554
4,958,062
107
7
112
83
$45.07
$44.66
43.16
5
3.75255c
.43.16
43.16
$36.93
'
S.
DEPT.
Oct.
OF
SERVE
6
-Oct.
6
23.425c
23.425c
23.425c
21.400c
.Oct,
6
103.000c
103.000c
103.000c
80.000c
19.500c
19.500c
19.500c
15.000c
19.300c
14.800c
-Oct.
at
DAILY
PRICES
6
-Oct.
at
6
v
:
23.200c
23.200c
19.300c
19.300c
15.000c
15.000c
'
.
15.000c
21.225c
10.500c
100.70
100.69
103.69
111.25
111.25
111.44
116.41
116.22
116.22
114.46
114.27
110.70
114.27
104.66
104.83
106.74
107.09
107.27
Oct. 11
112.00
112.00
111.62
115.24
115.24
All
2.45
3.10
3.09
2.83
2.84
2.84
2.94
2.93
2.94
2.7ft
-Oct. 11
3.14
3.14
3.13
2.94
Baa
-Oct. 11
3.49
3.47
-Oct. 11
3.35
3.33
3.32
2.94-
3.33
:v
3.06
3.06
3.08
2.89
2.89
2.89
2.76
.Oct. 11
INDEX.
OF
Fats
398.2
406.9
421.7
;
9
235.8
238.9
242.7
234.8
9
211.0
205.6
•224.4
9
255.6
259.8
270.0
296.3
296.8
294.9
9
212.2
209.9
224.2
294.9
Building
Farm
machinery
All
groups
combined
received
Orders
—
PAPERBOARD
NATIONAL
(E.
Tin
York
235.6
235.3
232.7
156.4
157.5
155.3
151.5
142.2
140.9
133.6
9
149.8
149.8
147.5
135.7
9
146.0
146.0
144.5
127.1
9
220.1
222.4
225.9
213.6
Quicksilver
U.
2
209,094
165,103
234,396
'(/, 233,861
'•
2
191.033
188.146
182.685
96
94
91
358,586
392,753
492,845
pound)
(per
(per
(per
144.7
143.9
146.3
=100:
2
products
-Oct.
—
167.1
2
186.4
v
Textile
Fuel
leather
Building
and
Miscellaneous
All
comodities
2
183.9
187.8
184.0
187.9
187.9
189.2
186.7
2
146.5
146.7
147.5
141.0
2
138.2
137.8
137.6
115.3
2
171.8
171.8
172.0
203.1
202.9
2
203.2
182.3
2
133.6
133.5
132.1
123.9
2
147.9
147.8
146.9
131.9
commodities.
Oct.
2
119.1
-119.3
118.5
115.9
Oct.
products
—:—
All commodities other tha*n farm products and foods.
•Revised
figure,
{Reflects
effect
of
strike
in
179.7
182.4
180.7 '
Oct.
farm
158.5
158.3
158.7
151.3
163.1
164.4
163.0
162.8
163.8
162.8
150.4
153.3
138.6
153.4
SExcludlng California
153.3
figures
which
refinery strike.
Nominal
$93,000
$63,640
$1,900
$1,900
$1,759
$1.95Q
$1,950
$1,773
$2,000
$1,800
15.000(3
$2,000
.
pound).™
.
16.000c
16.000c
20.500c
Louis
20.500c
20.5000
15.000c
15.000c
10.500Q
40.000c
As
RR.
of August
EARNINGS
Total
AMER.
31
40.000c
Not avail*
$28,055,225
$27,866,073
$28,434,21*
$868,089,239
$841,993,545
$745,976,270
637,361,854
(000's omitted)
CLASS
—
I
ROADS
RRS.)—Month
operating
operating
of
626,159,046
565,956,187
(ASSOC.
cent
per
\
•'
August:
revenues..
expenses
73.42
75.87"
$96,398,698
$84,256,773-
105,256,808
86,000,000
76,700,000
81,145,52*
53,000, OOCC
$1,022,000
$1,265,0000
598,400
558,500
400,217
$252,737,847
5,582,956
$253,100,807
4,832,229
$259,220 548
3,952,317
$247,154,891
$248,268,578
$255,368,231
2.200%
railway operating income before charges
charges (est.)
74.37
$99,842,934
115,694,714
$988,200
—
UNITED
STATES
BUREAU
OF
EXPORTS
AND
CENSUS—Month
2.199%
IMPORTSof
:
172.9
'
were
unavailable
due
to
Imports
UNITED STATES
GROSS
DEBT
DIRECT AND
GUARANTEED—(000's omitted):
As of Sept. 30
fund
balance
;
Net
debt
1
Computed annual interest rate
f.
»
/
*Revlsed figure.;- fBased on the; producers' quotation.,
of the producers' and
platers''quotations,
§Based on
five tons
{Based
on
platers' quotations
or
more
but
less
than carload lot,
**F,O.B. Port Colboine,
ft***-""**
H
August;
(000's omitted):
151.4
—Oct.
—Oct.
—i,Oct-,2
California.
Nominal
MONEY IN CIRCULATION—TREASURY DEPT.
General
than
33.000c
33.500a
$93,000
150.7
Oct.
articles
35.940©
35.000c
35.500c
Nominal
Spot
_™
St.
38.170c
35.000c
178.3
2
Oct,
products
38.170c
80.000C
35.500c
__
;,
Net
Oct
1
other
J.)___
Net Income after
Oct
materials
Manufactured
(E. & M.
(per pound)—East
187.5
Special groups—
Raw
$81,649
(per pound)
Aluminum, 99% plus, ingot (per
Magnesium, ingot
(per pound)
157.1
Oct.
allied
Semi-manufactured
$75,000
§Cadmium
187.8
prodm
goods
materials
Housefurnishings
$75,040
-
167.4
.Oct.
products..
lighting materials
metal products-
and
Chemicals
pounds)
76
pound)
168.7
Oct.
products-
and
Metal
of
(per
.190.8
•
-Oct.
and
$35,000
Taxes
commodities
Hides
78.900C
$35,000
pound), bulk, Laredo
pound), in cases, Laredo
Operating ratio
Farm
103.000c
102.400c
$35,000
(per
Platinum,
Total
144.4
$4.02631
103.000c
tCadmium
OF
Oct.
42.744d
$4.02750
102.400c
tCadmium
100
375,884
70.601C
44.667c
$4.02750
:
price)
pound), Chinese,
refined, per ounce
(per pound)
176,834
2
2
Oct
•
45.932d
'
99 %
or
S.
flask
(per
liAntimony
Zinc
.Oct.
All
ounce)
Straits
Chinese
(per ounce
Antimony
142.2
per
(Check)
York,
Gold
Antimony
232.5
ounce)
(pence
Exchange
Antimony,
9
15.000C
14.800C
Exchange—
(per pound) —
169.3
9
refinery
refinery
(per
New
215.7
9
York
New
168.8
159.1
f
73.835c
197.2
187.5
September:
75.345c
London
Sterling
233.8
187.5
QUOTATIONS)—
19.300c
170.1
187.8
J.
19.300c
Sterling
New
194.1
9
M.
&
pound)—
and
233.8
.Oct,
LABOR—1926=
253,000
August:
*'Nickel
AVERAGE=100
212,000
(DEPT.
of
21.388C
168.7
190.3
Month
19.500c
193.8
.Oct.
WHOLESALE PRICES—U. S. DEPT. OF
497,000
PRODUCTS
—
pounds)
23.425c
233.8
ASSOCIATION:
(tons)-——
7,706,000
Louis
9
Oct.
:—:
7,874,000
*7,992,000
19.500c
St.
9
Oct.
Fertilizers
15,580.000
*8,121,000
8,010,000
23.425C
9
262.1
Oct.
.
*16,113.000
8,145,000
____
export
287.2
Oct.
drugs
285.1
York
274.1
Oct.
and
materials—
359.4
*317.7
16,155,000
goods
WROUGHT
(in
(per
266.9
Oct.
materials
Fertilizer
401.3
318.1
employees in manufac¬
Electrolytic,
Lead
9
Oct.
Chemicals
403.1
of
21.225c
Oct.
Metals
321.8
23.085c
Oct.
commodities—
—
*359.0
23.200c
Oct.
Miscellaneous
360.1
domestic
Oct.
Fuels
Textiles
133.4
—
Electrolytic,
297.6
Oct.
1
*137.4
.4
266,3
9
Oct.
Livestock
173.7
...
137.7
_—_l
Average for Month of
Copper (per pound)—
232.1
Oct.
Grains
153.3
184.4
184.6.;
—-
goods
METAL PRICES
446.5
Oct.
-—
158.1
goods
Silver,
oils,
and
6,110,000
158.4
goods
Silver,
Oct.
products
Cotton
6,452.000
1
COMMERCE)
Silver
Farm
12.562,000
6,658,000
*6,296,000
__
manufacturing
Shipments
COMMOD¬
1—-
*12,954,000
6,667,000
6,306,000
goods
number
Durable
New
Foods
July:
—
Non-durable
2.86
Oct. 11
ASSOCIATION—WHOLESALE
ITY INDEX BY GROUPS—1935-39=100:
DEPT.
turing industries—
All
3.20
Oct. 11
FERTILIZER
300
12,973,000
S.
goods
Non-durable
2.25
3.46
Railroad
COMMODITY
294
2.71
-Oct. 11
—
2.45
311
*259
____
PAYROLLS—U.
of
313
319
-
adjustment
manufacturing
MAGNESIUM
•(''■•-7:\
2.45
3.10
-Oct. 11
MOODY'S
Average=100)
indexes—
Durable
117.80
-Oct. 11
3,902,401
RE¬
goods
Estimated
109.42
-Oct. 11
Aaa
NATIONAL
(FEDERAL
variation
LABOR—Month
Payroll
115.82
115.24
;
AVERAGES:
—■
corporate
to
Employment indexes—
107.09
Oct. 11
A
prior
manufacturing
Non-durable
117.40
110.52
104.31
Oct. 11
DAILY
114.27
110.52
-Oct. 11
YIELD
11
-Oct. 11
Bonds
COMMERCE):
linters)
SALES
seasonal
seasonal
Durable
118.80
-Oct.
BOND
OF
All
114.27
-Oct. 11
Baa
11,857,000
September:
for
Non-durable
100.69
Average
21,143,000
15,219,000
5,309,939
EMPLOYMENT AND
AVERAGES:
Oct. 11
Govt.
OF
of
All manufacturing
Durable goods
-Oct. 11
S.
(DEPT.
(exclusive
SYSTEM—(1935-39
of
Adjusted
23.200c
23,323,000
15,079,000
bales
___
Without
U.
92Q
AGRI¬
l:
gross
DEPARTMENT STORE
38.08
.Oct.
Louis)
500-lb.
GINNING
1
Electrolytic copper—
Average
2,581
957
.
23,323,000
Month
MOODY'S
3,202
6,256
2,755
2,698
2,717
3.19541c
M. J. QUOTATIONS):
(E. &
BOND
1,202
3,031
6,857
964
CULTURE—As of
Running bales
3.75255c
$46.07
MOODY'S
2,167
965
62
PRICES:
.Oct.
(East St.
fj-Vc"
3,851
3,148
.
loans
ACREAGE—U.
Oct.
Zinc
•
6,829
accounts
5,193
■;
1,783
3,913
credit
payment
credit
Production
3.75255c
Louis),
1,689
1,836
—
credit
Charge
7,328
3,477
1,804
I
Other
COTTON
(St.
$11,454
7,553
3,640
I
Automobile
326
-
Oct,
Lead
$14,185
credit
Acreage
(COMMERCIAL
METAL PRICES
932,067
INSTITUTE:
5,481.632
IRON AGE
588,700
939,677
short-term
credit
Sale
COTTON
FAILURES
6,253,400
5.664,700
435,117
31:
credit
consumer
Noninstallment
SYS¬
6,147,968
1,123,055
—
5,712,851
$14,382
tons)
6,458,389
5,842,523
615,866
tons)-
(net
OUTSTANDING—BOARD
GOVERNORS
OF
THE
FEDERAL-
Service
ELECTRIC
152,979,000
77,560,000
Oven coke stocks at end
Single
EDISON
253,210,000
(BUREAU OF MINES)—Month
coke
Instalment
Oct.
AVERAGE=100
TEM—11)35-39
193,020,000
282,983,000
Municipal
coke
Loan
STORE
301,785,000
330,777,000
CONSUMER CREDIT
Total
lignite (tons)
Pennsylvania anthracite (tons)—
Beehive coke (tons)—
DEPARTMENT
$494,805,000
233,015,000
360,786,600
•
(net
4,206,000
OF MINES):
BUREAU
$563,792,000
304,631,000
;
anthracite
43,958,000
—Oct.
——
and
coal
$665,417,000
Month of
—
construction
Beehive
credit
COAL
38,041
44,819,000
Oct.
—-——
—;
60,357
EN¬
—
construction
Beehive
7
;
municipal
50,939
(tons)
September:
Oven
construction
period
of
CONSTRUCTION
(BUREAU OF MINES)—Month
Production (net tons)
Oct.
construction
Public
end
at
COKE
NEWS-
construction
S.
92,549
136,574
Pennsylvania
RECORD:
Total
67,867
68,605
45,246
construction
Public
68,130
63,850
57,504,000
Oct.
•
64,721
Federal
;_Oct.
—
(number of cars)
(tons
41,117
Bituminous coal and lignite
cars)
grades
(tons)
2,000
GINEERING NEWS RECORD
September:
6,241,000
8,517,000
RAILROADS:
AMERICAN
OF
Revenue
all
lbs.)
period
of
orders
7,182,000
•
of
-
of
ENGINEERING
8,598,000
§6,380,000
Ago
77,803,000
end
COAL OUTPUT
ASSOCIATION
output,
™______
(tons
5,309,000
17,645,000
Yeas
Month
INC.—Month
lbs.)
Private
2
Oct.
at
t5,452,750
§4,965,000.
§15,369,000
§2,320,000
§6,467,000
§6,689,000
INSTITUTE,
smelter
2,000
Stocks
output—daily average (bbls. of 42 gallons each)
to stills—daily average (bbls.)—
output
ZINC
Shipments
runs
Gasoline
:
Previous
September:
Slab
of
oil
of that date)
Month
96.8
AMERICAN PETROLEUM INSTITUTE:
Crude
are as
Latest
of
ingots and castings (net tons)
month available (dates
or
of quotations,
cases
Ago
96.1
Equivalent to—
Steel
in
or,
Year
^
steel
Thursday, October 14, 1948
Indications of Current Business Activity
The
AMERICAN
CHRONICLE
N.
S. U. S.
packed in
cases,
duty included...,
.
fob
'
New
j
2.128%J
the
average
((Domestic
York
Volume 168
COMMERCIAL
THE
Number 4742
FINANCIAL CHRONICLE
&
(1569)
3T
through the following tent any change in the price level*
and to over 5% by which is considered temporary. Jt
August, 1929, It seems difficult to is hard to see how anyone can.
understand
why anyone should avoid the conclusion, however*
assume that this time a lk % rise that the rise in the price level
in rates to a level of only llA% stocks between 1923 and 1929, -as
is likely to have a more prompt compared with the 1910-1914 pe¬
level held
February),
A Stock Market Forecast
(Continued from first page)
still seeing the effect of the infla¬
tion spiral which was released by
this action.
,;v
-■
.
By the spring of 1946, when
we
found that the New Deal economic
doctors
had
ministered
tient who
prescribed
stimulant for
a
was
ad¬
and
a
pa¬
in need of
more
a
sedative, psychology went to the
other extreme and "the only thing
that mattered"
the inevitable
was
crack-up of OPA. All through the
spring of that year, when the mar¬
ket
as
whole
a
selling
was
at the
highest levels touched in 15 years
(and at the historically high level
of
about
17
times
the
indicated
earnings for that year) it
ficult
to
direct
the
dif¬
was
attention
of
investors and businessmen to any¬
thing except the impending rise in
•
the general price level.
After * the
widely publicized
Dow Theory gave a "bear market"
<
signal
Sept. 3 (when the DowIndustrial
Average first
on
Jones
broke
the
Feb., 1946 lows and
178.68), it suddenly be¬
closed at
popular to look only at the
came
bearish side of the economic pic¬
ture and,
specifically, to expect
a
repetition of the 1919-1921 market
and
in the forefront of most
.v;:/ dissaving by some families.) How¬
(3) An extremely large backlog ever, even if the American public
of savings built up during the war as a whole were currently spend¬
period.
; '^Jyk "-v
{-• v1' ing between $5 billion and $10
(4) The high level of govern¬ billion a year of their wartime
this rate of
spending
ment expenditures for armament savings,
could go on for another five or
and other purposes.
(5) A tremendous potential sup¬ six years before exhausting the
ply of credit, which can be re¬ indicated excess savings of the
duced to only a very small extent, war period, over and above the
in view of political commitments pre-war average rate of savings.
the prewar average.
to
mar¬
ket analyses up; until May of thisi
when the market finally
cleared the 1947 highs (and there¬
year,
by canceled, at the 188 level, the
given on Sept.
3, 1946).
After a further rise of
only about 3%, attention suddenly
bear market signal
became
the
fqpused almost entirely on
possibility of an early out¬
break of World War III.
this
was
development
to
shift the
sons" for
All that
excuses
or
labor
have
been
threatened
ever
Day, to such factors as
possible excess-profits taxes, new
governmental
controls, et cetera.
The undercurrent of fear which
has
prevailed during the greater
part of the past two years can be
traced first to the propaganda
put
out by the economic planners in
Washington,- and secondly, to the
influence of the Dow Theory. Un¬
fortunately, this fear technique
sponsored by the New Dealers has
left a lasting imprint on public
psychology even after the bases
for
fears
ranted.
have
proved
unwar¬
It takes time to undo the
damage to confidence by the re¬
peated predictions of an impend ¬
ing
collapse
have been
in
earnings
which
much in style since
so
October, 1946.
Before we analyze the current
picture, it might be well to go over
briefly the factors in our economy
-which
have
been
overlooked, or
at least underestimated,
by those
who have been predicting a
major
decline'
in
business
and
stock
prices during the past two
years.
Sustaining Factors in Our
bottlenecks
which limit the
building of hous¬
ing Units to only a few hundred
thousand
a year in excess of the
number destroyed by fire or ob¬
solescence,
plus
the number of
being created each
families
new
year.
(7) The very large backlog of
public works projects which are
being held up largely because of
the
shortages of manpower
building materials.
and
commodities, which
helps to bring these prices into
balance with
those
of
in¬
dustrial products.
All of the above
factors are, I
believe, self-evident. It might be
in
order
to
attention to
devote
a
This is not true of all industries
ties
little
more
of the offsetting
factors, inasmuch as
these appear to be securing the
Unfavorable Factors
in
The high level of prices is
some
out
consumers
of
market
for certain types of
goods—This is perfectly true, but
the overall picture is one of a very
high level of total
It is
mand.
consumer
estimated that
de¬
about
one-third of the American
are now worse
in
off than
because
1939
public
they were
their
incomes
have not kept pace with the
in
costs.
better
However, two-thirds
off, and in
buying
is
power
more
in
few
some
cases
of individual
rise
are
the
groups
than double that of 1939;
instances
has
the
buying
of any group declined by
comparable percentage.
Total
power
a
personal incomes,, after taxes, are
now running at the rate of
$187
billion per year.
This compares
with $151 billion in 1945 and $70
in
billion
de¬
a
plant construction during
with 1948. This
does not appear to be a serious
matter, however, inasmuch as a
great deal of public works, com¬
mercial building, and housing has
been
held up during the past
three years because of the com¬
petition for labor and materials
by
the
industrial
construction
division of the building industry.
1949,
as compared
This alone would
to
seem
insure
well-sustained level of building
activity throughout
1949, even
though it may be necessary to re¬
duce over-all operations for the
year as a whole by as much as
5%, in order to bring about a
better
ply
balance
between
and
demand
critical materials.
the
sup¬
labor
of
and
(4) Inventories
1939.
The
increase
of
140% since 1939 compares with a
rise in the cost of living of about
73%. Quite obviously, the over-all
buying power of the American
public, without regard to the high
level of previously accumulated
savings, is sufficient to sustain a
piling
are
up
in
and particularly in
soft goods—If we can judge by
experience, this is merely evi¬
we
in
are
an
advanced
stage of the business cycle, rather
than that a major decline is im¬
minent. It might be well to recall
that the overproduction of table
model radio sets and the
inventories
of
up
backing
of. shoes
and
cotton goods in the
heralded
were
spring of 1947
signs of an im¬
as
minent general
collapse in busi¬
What actually
happened? There was a moderate
at
ness
that
reduction
time.
in
production,
an
in¬
in selling efforts, and a rise
in the level of earnings and sales
crease
of
the
strongly
situated
companies to new high levels! It
more
to be
seems
a
little unrealistic to
expect curtailment of production
in
few
a
lines, as pipelines are
to lead to a downward
filled,
spiral in all business when such a
large segment of our population
cannot
secure
all
they need and
the
can
goods that
still afford.
(5) The supply of credit is being
curtailed through Federal Reserve
action—The second increase in the
rediscount rate (of %%■') to 1V2%,
and
the increase in reserve re¬
quirements, have led to
an
early
deflation
via
fear of
a
the
bank
credit route.
In the past, several
high level of demand.
inflationary booms apparently
(2) Many individuals are again
have been brought to a halt by
living beyond their current in¬
deliberate Federal Reserve action.
comes
This
point has been
The fact is overlooked, however,
stressed in a number of propa¬
that it has usually taken fairly
ganda releases by our govern¬
drastic action to stop a boom, and
ment,
in
connection with
the
—
Economy
Business
activity,
on
the whole,
has been at what might be called
"boom" levels ever since the last
half
of
1946.
several
There
have
been
periods,
drive for the reenactment of price
and
credit
controls.
Should
not
this development be
that
moderate rise in the redis¬
a
count
rate
has
never
led
to
an
early collapse in business (or in
stock prices). For example, there
were
tually inevitable because of tem¬
considered in
light of the fact that it has always
been true that many
American
families
live
beyond
their in¬
porary declines in the demand for
comes? And is it not also true that
the Federal Reserve banks, start¬
textiles,
some
as noted above,
immediate general busirecession was considered vir¬
when
nes
new
an
a
decline in contracts for
construction, and/or because
<of sharp declines in the
prices of
agricultural products. In each in¬
of the wartime savings were
pointed out in previous
the market outlook,
of
personal savings during the four
The fundamental factors which,
in
our
opinion, continue to domi¬
nate the
include
(1)
overall business outlook
the
An
following:
indicated
demand for
all of the passenger cars and
light
trucks which
can
be produced
<
in
ing in December of 1917. The
As I have
reviews
increases
the
rediscount rate by one or more of
serve
years
subsequent events proved
fears were groundless,
unduly exaggerated. At
no time did a
slowing down in any
segment of our economy result in
the
type
of
downward
spiral
which brings about a self-generatIng business recession.
of
erage rate for
that these
at least
series
earmarked for postwar spending?
stance
or
a
banks
effect than did the increases
av¬
the 12 Federal Re¬
stood
at
4.3%
from
February to November, 1917, but
by progressive steps
rose
to 4.8%
1942-1945 reached an aver¬ by June, 1918 (and to 6.0% by
age of $30 billion a year, as com¬ February, 1920). From November,
pared with a maximum level of 1917, to June, 1918, the Dow-Jones
savings in any year before 1941 Industrial Average had risen by
of
$3.9 billion. Surely we are only 17 points, or by less than
going * out of our -way to find one-third of the 54-point (80%)
something to worry about if we advance which was to be recorded
"discover" that some of the people before the bull market ran its
who put money aside during the course in November, 1919. In the
1926-1929 period, after holding at
war to buy washing machines or
automobiles, or to modernize their an average rate of 3.5% during
homes; are starting to spend a the last quarter of 1927, there
small part of this money. Unfor¬ were a series of increases which
tunately, no figures are available brought the average rate up to
as to the current rate of spending
4.8%
by August,
1928
(which
in early
nounced
1918
Furthermore, we
1928.
a
or
an¬
during
now
have
situation where the decision to
riod, wasn't due in large measure
to the fact that the general price
level
was
40%' and
support government bonds at par War I.
can
have the effect of
more
than
offsetting
stabilized
50%
at
above
between
pre-World
(The range of the Dow-
Jones Industrial Average between
1910 and 1914 was 71 to 98. Dm*-
anything the Federal
might do in the ing the seven years from 1923 te
way of raising reserve require¬ 1929, this average fluctuated be¬
ments to the maximum permitted tween 86 and 381.)
There were
by law, or in ordering further other influenced present, Of course^
increases in the rediscount rate. but stock prices came down into
the range of the early '20s (%y
Psychological Factors
1931) only when the general price
There is a school of thought level collapsed. Since the current
which concedes the possibility of inflation of the price level is built
well sustained
business activity argely on an expansion of Federal
for some time to come, but still debt (and a Federally supported
insists that stocks in general are wage pattern) rather than on
call-*
in a selling rather than in a buy¬ able private debt (as was the case?'
ing zone. In order to follow the in the 20's), there is a much great¬
principle of looking at both sides er prospect that our current in¬
of the picture, it is necessary to flation is at least semi-permanent.
examine the assumptions or be¬
From the point of view of logic*
Reserve
liefs
Board
this
of
group.
it
(1) Common stocks
one
of
are
my
most naive
the
seems
inevitable that
over
tfw
histori¬
longer-term, the earning power
opinion, this is corporations is dependent to
cally high—In
and
mis¬
considerable
extent
the
on
a
re¬
leading of the various arguments placement value of tangible and
advanced to defend the bearish- intangible assets, and on the dol¬
ness on the stock market outlook
lar total of sales.
New competi¬
which has been so prevalent since tion will be restricted unless
po¬
October, 1946. This approach to¬ tential competitors can see their
tally disregards the relationship way clear to earning a satisfac¬
of stock prices to earnings, or the
tory profit on the new level *>&
It also
current value of the dollar.
costs. Furthermore,
profit mar¬
in¬ gins in a competitive economy
earning assets tend to work toward a level whidh,
of the average company even in
merely represents the difference
prewar dollars. It is perfectly true between the costs of the efficient
that the current price level "has
producers and those of the mar¬
been exceeded or equaled in only
ginal suppliers. I see no reason
ten of the past 50 years," but it
why these differences should not
19423
ignores the
very
substantial
in the basic
crease
certain fields,
dence that
the
Business Outlook
the
be
to 25% in in¬
some
greatest amount of attention.
forcing
there will
that
are
dustrial
unfavorable
(1)
companies, but the probabili¬
or
cline of about 20%
a
(8) A moderate decline in prices
of agricultural
better
(3) Plant expansion appears to
or passed its crest—
have reached
par.
material
and
"rea¬
since V-J
or near
(6) A continued shortage of
housing, which is being corrected
only gradually because of the
however,
expecting the decline in
earnings with which
corporate
we
did,
support long-term government
bonds at
business pattern. This theme
was
during the next 12 to 18 months. of the wartime savings. (Net per¬
(2) The continuation of an ex¬ sonal savings are currently run¬
port surplus of at least $5 to $6 ning at the rate of $12 billion a
billion a year, or about five times year, in spite of the evidence of
is
equally true that the indicated be as great in the future as they
potential earning power of do¬ have been in the past. If our price
mestic corporations has probably level is to
average say 80% above
been
equaled in only one or two
past 50 years. As stated in
my "Chronicle" article on Oct, 2,
1947, similar reasoning, had it
been
applied in 1923 or 1924,
would have led to the conclusion
because of the basic wage
policy on the one hand, and the
supply of money on the other, this
means that the well managed cor¬
porations can look forward to a
greatly expanded level of dollar
that stocks were "historically high"
sales.
It is only a question of
when they reached a level of 105
time before this is reflected in
in each of these two years, inas¬
the prices of equities, regardless
of the
much
as
the Dow-Jones Industrial
Average had sold above 110 dur¬
ing only one of the preceding 26
years.
This index advanced to
above 200
by 1927, and to 381 by
1929!
prewar,
of the
are
illogical theory that stocks
not
an
inflation hedge.
(3) The next important change
in overall corporate profits should
be on the downside—The point is
made that even if business activ¬
(2) Common stocks do not pro¬
ity does hold at near current lev*
inflation
protection — This els
during the next 12 jmonths*
is defended by tabula¬
reported
vide
statement
tions
showing that stock prices
during certain periods in the mar¬
ket cycle have been lower than
they were at previous periods,
even
though there had been a
substantial
net
advance
in
profits may decline be¬
cause of
the prospect of a smaller
inventory
relatively
in
decline
small
have
enhancement, and the
great impact - that ' a
on some
the
demand
wou®&
companies' earnings.
The fact is overlooked that equfty
prices are not discounting the cmrent level of earnings. In the past*
month or year-to-year correlation there have been several
examples
between
commodity
and
stock of a similar situation when the
prices, but the conclusion cannot possible or prospective decline 4n
be avoided that historically and
earnings,
once
it actually oc¬
logically, there is a long-term curred, was accompanied by rising
correlation
between
equity and
stock prices.
A few specific ex¬
commodity prices. Stocks natu¬
amples might suffice:
rally reflect to only a limited ex¬
general price level. It is perfectly
true that there is no month-to-
(a) DOW-JONES INDUSTRIAL
AVERAGE
Price-Earnings
Ratios-
Price
Low
Range
159-115
11.5
8.3
11.39
Year—
High
167-135
14.7
11.9
17.5
Earnings
$13.89
1925
1926-
8.72
202-153
23.2
11.64
134-106
11.5
1942
8.87
120-93
13.5
1943
8.30
149-119
17.9
1927
1941—.
—
(b)
SELECTED
General Motors
Year—
Earn.
Pr. Range
9.1
10.5
v
14.3
ISSUES
Southern Pacific
Stand. Oil of N. J.
Pr. Range
Earn.
Earn.
Pr. Range
14- 8
$5.15
47-33
$4.44
48-29
$9.16
3.55
45-30
22.64
18-10
3.06
3.23
56-44
17.80
30-16
2.25
-30-46
3.68
66-52
11.09
43-23
3.08
58-51
This is not true
!,
47-30
of the market as
that stock prices
expected to decline if a whole, as may be seen from the
earnings recede from fact that the croste-section of the
current
levels
might
be
valid market which makes up the DowJones Industrial Average is cur¬
when applied to certain
The argument
should be
and
when
individual
securities, which have been rela¬
tively overvalued in terms of in¬
dicated long-term
earning power.
rently selling at only about ten.
earnings, even if allowance
(Continued on page 38)
times
38
(1570)
THE
7
COMMERCIAL
FINANCIAL CHRONICLE
&
the
A Stock Market Forecast
(Continued from
is
made
for
inventory
profits
which may be included in current
stances
earnings.
1939.
Over the past 20 years,
average has sold below ten
this
times
earnings
the danger
following primary Dow Theory
"buying" signals. These two in¬
page 37)
in
occurred
In
1923
preceding
only
cases,
the subse¬
quent further advance carried to
lz±°l
when earnings de¬
year,
clined.
Selectivity Important
the
"
Anyone who has devoted
sub¬
a
there
was
early outbreak
an
during
re¬
The
cent
the
after
to
appears
be
upward
ing to equity positions.
currents in
more
our
The
cross¬
economy are much
than
they
and,
under
SEC
regulations, the market for
most
numerous
before
the
stpeks
war,
has
that
become
the
values
so
distortions
least the next
for
capital
is
it is
say,
if
seen
required.
new
essential
as
certain
that
as
ever
to
well
between
as
industries
time
to
to
for
factors
Readjust¬
come.
the
240
would
260
—
regard
which
zone,
as
a
be
dis¬
normal objec¬
tive imder real peacetime condi-
as
soon
carefully,
as
of
of the
any
course,
studies
suggest
the
need
greater-dhan-normal
for
degree
will
thg
the
not
general price
effect
all
extent.
same
average
1Qon
yearly shipments between
^10^
+„ij
strain
government
agencies from
+w„+
Technical
during the
current season
we
shall ship a little less; yet authori¬
ties
believe
that
450
million
level
companies to
'
,
bushels should be the gpal. Under
these circumstances markets have
Considerations
Experienced
investors
of
tors.
individual
These
economic
or
against
semi-mechanical
■
approach.
s7n
of
,
some
The
As
we
the
Formula
mechanical
"technical"
or
Plans
rea-
such
a
I
The long-term technical studies
we
have found to be the
.
thaV the
Support Problem
probably know,
you
could
borrow 90%
adjourning
for
program
of
extended
another
this
year,
October,
1946 lows in the
Dow-.j cretionary power to administer
Jones Industrial Average were not
them between 52 and 75% of par¬
likely to be broken during 19.47
ity. In the early period, a lower
or
1948, and that the underlying
percentage was used. Since that
trend of the market will prob¬
time, however, we have not acted in
ably be upward until at least the fear
of low prices.
We have in¬
early
months
of
1949.
These
sisted on high and still higher farm
studies had called for a decline of
prices, regardless of the urgent
between 40 and 50 points in the
need
for
holding
inflation
in
Dow-Jones
Industrial
Average check.
To illustrate what an in¬
during 1946, from whatever highs
fluence the loan has been, I quote
reached
were
in
the
first
two
from
months of that year. Certain facets
of this technical approach
suggest
that
a
we
not
are
major bear
stock
prices
above
the
likely
market
have
200
after
risen
to
the
eral
1946
age
to
From
a
May,
prices
advanced from
68c
an
to
aver¬
per
record
a
was
portant factor in domestic wheat
prices." It
was my
,
hope in the early 30's
,
.
when farmers were threatened by
!taxes and mortgages coming due
studies.)
shorter-term
of
"Wheat
loan pr°gram
be-
1947.
(We were on record with
predicting a bear market during I
1937, and again in 1940, on the
basis of these
Agri¬
bushel in 1940-41
high of $2.81 in midJanuary, 1948. Until 1934-44, the
Dow-
and
of
own
issues:
growers
well
laYd
base
Department
periodical,
"The
Wheat Situation," repeated in sev¬
Average, and/or
elapLCd0'£romathe
October,
culture's
have
level in
Jones Industrial
tween
to
until
the
technical
tbat
law
a
temporary
help
fallen
might- be
rendered and that taxes might be
de-; abated during the emergency so
cline following the Dow Theory
j that
producers would not lose
"bull
market
signal" given on their land.
I was fearful then
May 14th does not violate prece-! that a non-recourse loan might
or-
under
federal
of this
presence
for this
later
was
up
forbid¬
our
at less
This
ac¬
surplus in
that in 1940 the
way
that
reason
enacted
parity price.
bottled
a
sur¬
price-depressing factor.
was
the
such
car¬
ryover reserve rose to 632 million
bushels,
record for all time, and
three times the normal. In
about
1942,
969
a
wheat
our
million
crop amounted to
bushels and
408 pail-
lion
bushels, or nearly half
impounded under loans.
al-
were
originally established, the
Secretary of Arigculture had dis-
.
was a
tually
though starting in 1950, a modified
plan becomes effective. When loans
most helpful in the past 15 years
us
of
farmer
fore
which
beenk telling
had
control, the
than
Parity
all
parity on basic commodities for
two years following the declaration
0f peace.
The 80th Congress be-
large following.
have
wheat
ding CCC to sell its stocks
were
the
some
Historical-
have
detailing.
some
committed by our Con¬
gress to a loan program whereby
* ?a ^be D°w Theory and
Price-Level
important, which I feel
as
requires
in
competing with tne
new crop's.
We had also seen be¬
fore that when 250 million bushels
Maybe it
fre¬
It is partly for this
avoid
plus
almost
quently like to check conclusions
based
primarily
on
economic
studies
to
ulus, but there is another factor
fac¬
individuals
der
responded somewhat to this stim¬
realize
that there is always a
danger of
misjudging the strength or weak¬
ness
a
of
caution.
selling accumulated stocks
in
de¬
more
pendable long-term technica 1
(Continued from page 16)
regarded and, of course, it should
be, borne in mind that a semi-
ment
we
Menace of Government
In Grain Market
companies
cannot
was
I feel
a
sure that only war averted
complete price collapse at that
time.
There can be little argu¬
ment that when government non¬
recourse loans on commodities are
unrealistic, and too high, finally
ownership of these commodities
will
to
pass
default.
the
Failure
government
refusal to
or
by
rec¬
ognize thisinescapable truthYhas
resulted
in
down
price- raising
throughout the world—
of
schemes
the
disastrous
break¬
many
too
numerous
will
time permit much discussion
to
mention.
Nor
the question of parity, concern¬
on
ing
which
there
is
so
little
real
knowledge.
While
it
was
de¬
signed to restore a balance of pur¬
chasing power to the producer
based on periods of favorable ex¬
change, it has become greatly outrmoded, owing to the material im¬
provements in farming technique.
Better utilization of the soil, more
intensive
cultivation,
improved
fertilizer and seed, together with
mechanization, have all contrib¬
uted
to
higher yields of farm
products. The use of hybrid seed
for corn, Clinton oats, and rust re¬
point of view, it might be of in-
sistant varieties of wheat
sponsible, in addition to propitious
weather, for the
billion-bushel
There
casions
that the recent
have
within
the
been
past
two
25
oc¬
years
unnecessarily tie
plies,
thus
creating
when the market has experienced
a decline which cancelled between
shortage in
one-half
Furthermore,
and
initial rise in
a
relatively
two-thirds
of
the
bull market, after
moderate
advance
a
Farm
up
the
Board
we
domestic sup¬
an
artificial
wheat
had
we
crops, of which
five successively.
are
second
learned from the
years.
that
certain
agricultural interests tried to
re-
about
billion-bushel
midst of plenty.
days
keting place for those handling
grain to sell the risks of market
fluctuations
others
to
who
to
com
smallest
basis
of
a
to
what
have
we
crop,
acreage
bushel
it
re¬
Likewise,
of
will
the
present
the
American
an
pr another.
holding a wide
or
That
range
prevailing
threat
of
near
a
Dangers
(Continued from page 11)
terms in veterans' housing have
helped to inflate realty values and
building costs, thus boomerang-
ing
veteran
on
home-buyers and
threatening them and the govern¬
ment with losses when the inevi¬
table
reaction
A
sets
statutory
debt
in.
for
requirement
retirement
related
the
to
prosperity of the country, so that
the amount retired in a good year
is
greater than in a year of de¬
pression, is proposed.
Bond
A
Distribution Needed
distribution
wide
ment
bonds
in
the
mean
products at
as
Proposals to Offset
Public Debt
would
of
the
therefore,
attack upon
economy
and
form
en¬
whole.
one
of
govern¬
hands
as
the
of
safeguard
a
the nation's welfare because it
to
tends
to
discourage
unwise and
spending,
cushion for people
government
provides
a
to
meet the emergencies of
employment, or sickness, or
age, thereby helping to keep
un¬
old
prices,
despite
the
the
mounting surpluses. This will un¬ nation's economic life on an even
doubtedly involve our government keel; also it reduces the volume
in
rather large-scale
operations.1 of inflationary money and
the
Cotton is expected to demand
the; floating debt which has to be re¬
largest support operation in the funded from year to year.
year ahead.
Should 3 or 4 million
Noting that over the past year
bales be impounded, it would in¬
or
more
the Treasury and Fed¬
volve at least $450 million.
Oil
eral
Reserve
have
been moving
seed crops may require $50 million
by a succession of steps away from
in supports.
Potatoes, which have the
freezing of interest rates at
given much concern to the gov¬
excessively low wartime levels,
ernment for years, will again re¬
the committee says that this pol¬
ceive support, and a loss of $75
icy will give them greater free¬
million
is
generally
expected.
dom to combat inflation;
Losses
were
sustained
in
.
egg
The present tax system "penal¬
operations last year, and there is
jio
indication of
now.
improvement
any
It is this outlook for expen¬
izes extra effort—removes the
centive for
in¬
going the extra mile,"
operations, plus un¬ in the words of the committee,
recommends
particularly
public reaction, with which
prices held deliberately high, that lowering individual surtaxes,
which today are a brake on in¬
may prompt a review of the entire
"The 1948 Revenue Act
program when Congress convenes. centive.
When that time comes, I feel that made a good beginning in loosen¬
sive support
favorable
hedging operations will again gain ing those tax brakes" the
wider
acclaim, particularly by mittee continues, "but we
those
who
rely on govern¬
ment support methods..
now
It is not pure accident that hisrtory has recorded some of the
sharpest price declines due to gov¬
intervention
ernmental
when
bear constantlv
in
mind
com¬
must
need
the
for going further as
promptly as
the f'scal and general economic
situation permits.
"There may seem
tain contradiction in
to be
a
cer¬
of
attempted to reducing taxes at a time when
prevent normal laws of supply and debt reduction is so demanding.
demand from functioning.
-Very Reduction will have to be done
often political attempts, which ap>- gradually and tuned to the swings
pear right in theory, have their of business, prices, and the budget.
secondary consequences. It took But above all, it must be remem¬
us several years to pay the full
bered that the objective is
dy¬
penalty for violating all commer¬ namics. If the reductions renew
cial laws,
and withholding our incentive and stimulate enterorise,
wheat surpluses from export chan¬ they will largely pay for them¬
nels; following the Farm Board selves."
Era.
The very threat of substi¬
The committee expresses confi¬
tuting political laws in place of dence .that with a program such
means
laws has
economic
ror
were
for all of
us.
ar¬
certain
a
The
hor¬
price
sup¬
ports are included at all in a
peacetime program, they should
be at distinctly low- levels,
de¬
signed to safeguard against real
disaster
either
and
we
or
not
at
levels
politicians
that
think
may
fair and reasonable.
The
grain
trade
has
resented
of the attacks made upon it
for the reasons that too many of
the charges were preferred before
a fair hearing had been permitted.
Due to this fact, the three primary
markets in this country demanded
a Federal investigation last fall in
many
order
that
the
American
could be furnished the
which it could
clusions
to
a
program
•
people
facts, from
draw its
whether
own
con¬
that recommended, "this coun¬
as
try
carry its heavy debt load
still look forward to main¬
can
and
taining
the1 free
and
that has been
economy
and
strength
over
vigorous
gtory
the vears. The
task will not be easy.
our
It will take
courage, wisdom and a high order
of statemanship on the part of our
leaders, and understanding and a
spirit of unity among the people."
The
study
various
was
reviewed in its
of preparation by
the entire committee and appears
with
Mr,
stages
committee's
the
Executive
tional
The
is
Burgess
Committee
Bank
Citv
studies
approval.
the
Chairman of
have
of
of
the
New
been
Na¬
York.
financed
the
rapid by the Maurice and Laura Falk
had been Foundation of Pittsburgh.
occasioned
by
illegal
and
im¬
proper practices on
part of the
Exchanges, or whether it was the With Central Republic Co.
as
rise in commodity prices
government's buying program for
export which had been largelv
responsible for those events.
We
in
nothing less than
ties in
50
buy for
were,
excessive
the
grain
trade
port to about 140 other commodi¬
31/2
on
grain
people is described
on
in
system of free
attacks upon
The
time, the gov¬
ernment, in addition to supporting
basic commodities, is lending sup¬
a
Yet parity is computed
relation
a
are
harvest
At
them.
the
terprise.
have
capital
tificial
terest to note
dent.
Role of Grain Exchanges
the
the
managements, rather than opportunstic and shortsighted direction.
Competition as between industries
within
favorable
7 The
assume
reappraised
the
companies will continue to be
seen,
of course, but the under¬
lying fundamentals appear strong
enough, on balance, to preclude
companies
whose securities are purchased or
held enjoy farsighted and ethical
as
since
and
equity
Needless
ever
ments within individual industries
estimate the potential
in
earnings per share
which would be
any
operation of the Exchanges is es¬
sential to
that they have gained.
the
of
tions. The outlook will have to be
some
com¬
to
dilution
make
individual
basis
take
between
and
term outlook
case
extent
an
The :grain , exchanges, of
the
country have done much for agrL
October, 1946, the maladjustments
picture, while in¬
creasing in number and intensity,
still appear to be greatly exag¬
gerated, and not likely to over¬
very
panies,
been
in the economic
thin
prices frequently be¬
large. It is particularly
important, in appraising the long-
come
eight to ten months.
the
has
to
and temperament to
Consequently, the
grain trade's credit has been mo¬
selling at more than 11 or 12 times bilized and safeguarded to a very
earnings, as was the case in 1941, high degree of business efficiency.
This may mean that the upward For this reason, the banks have
pull on the Dow-Jones Industrial always loaned
almost the
full
Average is only toward about the amount of value of the warehouse
1946 high of 212, rather than to receipts.
seems
As
were
very
it
increase
which, if continued, all price sup¬
ports may be scrapped, and final¬
ly farmers will lose many benefits
threat of eventual hostilities
may*
of
course
prevent
stocks from
reasonable to expect that business
as a whole will hold at
very close
to the current high levels for at
consideration,
will
ment
culture and have provided a mar¬
development short of
shooting war, (which
unlikely)
appears
to be
the
on
With present high living costs, I
much concerned that resent¬
ana
fully discounted. The overhanging
into
whole when add¬
a
for
early
an
Taking all of the known factors
ignore the position and outlook of
of heavy produc¬
years
stock
is complicating
outlook
but
seems
the market
as
rela¬
our
record,
Conclusion
it is to
as
the
land.
■
Russia
near-term
in
prices,
England.)
years realizes that it is just
dangerous to buy indiscrimi¬
nately when the underlying trend
deterioration
tions with
of
within 30 days
declaration of War by
as
1948, but in
companies, econ¬
of many
case
improvement
in
labor
efficiency, should result in the
maintenance of earnings at well
above pre-war peak levels.
year were recorded
investments
of
for
gradual
World War II. (New highs for the
study
indicated
omies resulting from the installa¬
tion of new equipment and the
ing bulletin services at that time
advising
extreme
caution
and
liquidation,
in
the
event
that
stantial portion of his time to the
in
of
acre
late
levels
abovJ ,tbe
two
Thus
each
on
Corporate
both
velL1 eacb®f?
years
(1941 and 1947), and the Ithe
°? th® D?w ^eory "bull
price-earnings ratios at which m!rkel" ?!Snals' In J?39' tkf re¬
stocks have sold have always
risen,!
f1 flowing a Dow Theoiy
during
harvested
downward spiral
a
without recognition
bushels are being
farmer,
that many more
1949
or
early 1950. tion, the producer is receiving all
earnings may decline out of proportion to that for which
slightly from the record-breaking the original concept had provided.
before
in
and
of
ThursdayOctober 14, 1948
feel that it would have been
a
dis¬
aster had those attacks succeeded.
Every
person
1
(Special
to
Wright is
,
public
COLO. —Harold
with
now
Co.,
knows that the free Building.
.
Central
S. National
U.
.
Chronicle)
Financial
The
DENVER,
;
.
-
B.
Re¬
Bank
-
Volume
168
Number 4742
COMMERCIAL
THE
FINANCIAL
&
CHRONICLE
debacle
Business-Today and Tomorrow
(Continued from
consists
seven
of
Senators
seven
and
resentative
Wolcott
Cnairman.
With
economists
from
tne
Service
and
of
the
of
service
Reference
Library
of
mendations
the Committee
as
fit, and frames
an
over-all
lative
of
its
program
outline
sees
legis¬
This
own.
it
uses
as
a
guide and
criterion against which to evalu¬
ate
tne
various
bills
coming
up
from all the
special committees of
tne
Congress as to whether they
appear to be .consistent or incon¬
sistent in their economic
logic and
consonant or inconsonant with
integrated
national
of
program
an
national
a
high
pro¬
duction and the
high real purchas¬
line
of
is
with
it.
■
As
manner.
'
,
,
con¬
a
•
for the
have
we
first
set
a
in
signed
machinery, executive arid
legislative, for tackling the affairs
of
whole
a
economy
on
basis
a
the future
urban
government
staff
inten¬
are
sively pursuing that task, and
hope to exercise some
we
stimulating
and
directive
widespread
influence
each
for
discharges
the
cooperate
under
these
Contrasts
Now
these
with
less
institu¬
great
use
to
go
toward
upon
which tthe
the
number of assumptions of
continuation of a vig¬
a
in solving these
prob¬ orous defense program is
perhaps
they are posed by the the
most
outstanding.
If
we
objective set forth in the should
shortly be forced from a
as
policy
Employment
tions
Act.
cannot
be
These
solu¬
sought in
labor¬
atory conditions but only through
realistic study of and experimen¬
tation
in
tical
real
a
world
day-to-day
of
prac¬
operation.*
It
will require a
great deal of un¬
inhibited
re
thinking
of
our
formal economics and consider¬
-
able
revamping of our business
practices. A few of the theoretical
approaches and the practical ad¬
justments will be illustrated if
consider
the
market.1
our
the
capacity
consumers
there
is
be
of
short-run
field
of
one
to
in
the
also
to
instability
be clear
prospect
high employment or
shortage at certain
labor
of spots.
me
lessening
seems
even
to
mills,
This will tend toward
some
automobile
"fourth round."
producing lines to supply current
and
needs
little
evidence
cate the
im¬
of
phrase.
i
speculative
accumulations
ventory, but
and
tably the coal wage settlement of
last
July,.
We are still in the
of
in¬
process of
continual trimming
a
balancing
overextended
finding
greater
difficulty
in
passing this and related wage in¬
somewhat
Of course, the inventories
comes.
necessary
absorbing the industrial
consequences of that advance and
I suspect that we shall be
so as not to be
if
price
recession
to efficient operation at
high volume rapidly become re- creases on in price increases.
If
defense to a war
basis, obviously i dundant if unemployment
gains so, we may expect fewer and
we would
be off again on a
very any great headway.
smaller wage raises,
different tack, characterized
by
t.
Some proper * Concern is being v*Labor I
de&cit
financing and economic
expressed over real estate prices while the sun'shines," and it has
controls.
On
the
basis
of
the :
and the amount of mortgage in¬ been getting in quite a
crop dur¬
present "cold war"
status, I should debtedness. But there is
nothing ing the last few years.
As it
say
production and employment
comparable to the Miami land comes to digest this hay it wil1
are supported on a
high level, but
boom of the twenties.
Likewise, probably find a little less succu¬
without an
inevitable
trend
to
there is notable absence of a sky¬ lent and palatable than it antici¬
further dangerous inflation.
The next problem will be
rocketing stock market such as pated.
contributed so largely to the col¬ to
assure
Danger of Current Slogans
steady
employment I
'
As this point I want to sound
we
lapse of 1929.
been
Instead, there has
clinging to—or
a
at
the
high
rates,
that
and
involves
facing ' the
issues
note of warning as to the basis
return
to
levels
of
prospects and their specific rela¬ upon which
security of labor cost, prices, and the
you attempt to make;
tions to the transit
prices so low as to puzzle the absorptive
power
of, the mar¬
up your minds as to future eco¬
industry.
commentators.
When Mr. Hacker invited me to nomic prospects.
Perhaps thi s rec¬ ket. If some important goods are
I urge that
current
economic
a
a
recurrent
—
you
address
your
convention,
he
wrote:
do not allow yourselves to fall
victim to the current
slogan: "The
"Earnings of the transit indus¬ longer prosperity lasts and the
try are affected in singular degree higher
employment,
production
by the state of the general do¬ and prices rise, the more inevita¬
mestic
we
In
economy.
wodld
hope
your
that
you
talk,
might
discuss the outlook for the domes¬
tic economy in the next year or
two,
or
should
of the
for
even
you
care
a
to
ble
becomes
ger
will
it
a
bust
be."
the
and
big¬
Sometimes
this
is
longer period
elaborated into the proposition
that the crash will follow the war
by the same number of months
do
that the
Some
so.
lasts.
war
Such reason¬
specific questions in which
ing by analogy should be firmly
the industry is particularly inter¬ discarded in favor
of reasoning by
ested
are:
the
probable outlook analysis. Perhaps such a warning
for
the
level
of
physical produc¬
tion
of
goods
and
industrial
employment, likelihood of a socalled
'fourth
round'
of
wage
is
superfluous
But I
of
take
creases,
the probable trend
of
prices and. finally, the question of
ing
in
whether
You
are
combination
the
of
you
that
large number
conditioned by train¬
are
our
engineering
cause
pro¬
and
-
schools.
accustomed to the
measurement
the
preparedness
a
devices
use
of
the
and
effect
-
will tend
to offset
or
more
than offset production sags which
science.
but rather to discuss various pos¬
is
sibilities
as
cause
trend
developments,
of
you
see
the
present
and
such
a
note
the
talk
would
serve
to
key¬
and
extreme level of farm
been
a
prices has
major factor in the infla¬
tionary spiral.
turn
the
farm
lest
fears
prices
future
near
usher
raises
now
collapse of
whole
The marked up¬
agricultural supply
the
in
situation
might in
demoralize
the
commodity
market
and
in
a' general
depression.
our
economy,
how¬
ever, illustrates perfectly what I
said about the danger of reason¬
ing
by
reason
analogy.
One
cannot
you
important
are
result
critical
relationships
are,
of
course,
those
among prices, incomes and
tax flows.
Just one caution here
is to remind you that economics
is a social science, not a natural
transit science, that we are dealing with
executives some idea of the vari¬ human behavior—and human be¬
ous considerations
they will have havior in a free society—not with
to keep in mind in making their
merely mechanical processes or
plans for the next year or two."
chemical reactions and
certainly
ness
entire
and
program
Now
this
clear-cut
is
and
specifications
busi¬
convention
give
about
the
competent
I
have
most
set
ever
of
re¬
not
with controls
established
in
the
such
as
can
laboratory
the processing plant.
be
or
ture in 1948 that
had in
we
1928
1918, still less that we had in
or in 1873.
or
1907, in 1893,
The
agricultural collapses
of
early 20's and the early 30's
led us to provide some stabiliza¬
the
tion devices to prevent rural dis¬
tress from snowballing into gen¬
eral
unprosperity.
These
measures
the
were
process
improved.
cording
to
formula,
repetition
crude,
but
are
in
being revised and
If made flexiblev ac¬
of
a
thev
of
well
-
should
the
issue,
but
this
question
into the issue of longer-
merges
prospects, and I will return
range
it shortly.
to
Next,
of
the
the
near-term
prices.
eral
v
raise
you
Well, what
are
price-making
see
upward
an
question
for
the gen¬
prospect
-We
factors?
thrust
of
wage
costs and
shortage of certain ma¬
terials, particularly metals, and a
downward
of
pressure
more
ade¬
quate supplies of most farm prod-
of
mutual
tolerance
things to be done by and for
so
for
that
there
is
partial
a
action
depression
our
basic
no
paralysis
either
of
in
an
a
prolonged
happen only
if we stubbornly try to perpetuate
stimulated
and
somewhat
dis¬
stagnation.
or
That
can
torted relationships of
and
a great war
postwar catching-up period
a
rather than settling down to ham¬
out the permanently workable
relationships needed for and pos¬
sible in a peacetime economy.
mer
Long Range Outlook
This
brings
not yet
really
solved
have
come
writings
ture" so
in
that
problem
is
is
promptly
the
market.
productive
in
which
credit
in¬
of our
use
from
and
powers
savings and
future
ab¬
Recent
simply the manifesta¬
situation
a
derived from full
come
I
of my past
full flow of goods
a
from
inflation
of
some
with
services
tion
to grips with
That
"balancing the income
the
price struc¬
as
structure
sorbed
com¬
problem—much
it.
defined
and
brief
to
me
the longer-range outlook.
must admit that we have
fundamental
our
less
drafts
past
the
on
into the market as
monetary demand while the sup¬
ply available for purchase is only
goes
fraction
a
turned
feed
the
of
out—the
cold
a
total
supply
going to
balance
war.
this
All
is
implied
in
Mr.
Hecker's question: "Will the com¬
bination of the European Recov¬
Program
preparedness
and
ery
the
domestic
offset or
program
than offset sags which might
otherwise
develop at present
more
engineered
prevent
p
agricultural
maintenance.
1A
second
grows
gressive
damp
built-in
of
stabilization
device
of sharply pro¬
income taxation which tends to
out
off
system
our
purchasing power in
phase and to grant consumers
buyers substantial relief as
profits,
wages,
sales
and employment
tend to fall.
A great deal has been said
about
the
burdensome
effect
of
high
taxation in the last year or two, but I
suppose
if they had feeling, the drums
on
your car woilfld complain of heat and
pressure
when the brakes are applied
When monetary purchasing power is so
abundant that both business buyers and
consumers
are
bidding
against
each
other to create price inflation, taxation
that creates a large budget surplus and
permits
substantial debt retirement is
one
of
the
most
important and sureacting stabilization devices available.
excessive
the
boom
and
business
A
third
that
maximum
of
line
built-in
rate
when
it
the supply of goods and
supplies
25'}o
are
It
mand.
ment
to
deferred
is
benefits
of
the
in
excess
estimated
tends
in
the
to
outrun
releases it when
of market
de¬
that
might amount
purchasing
lost
unemployment
tries.
stabilization
recognizes
also
catching-up has been de¬
ferred by the need to bolster great
parts of the free world against the
of
menace
totalitarianism.
And
my answer
to the question is very
direct
and
simple.
seems
to
cold
war
that
the
being projected
program
would rather
The evidence
indicate
to
me
than offset the
more
probable
overtaking of domestic
demand at current price levels by
agricultural and industrial supply.
from a military bud¬
$15 billion to one of $16
$18 billion in 1950 or 1951, I
move
we
get
or
do
of
not
fan
see
the
least
retard
it
how
fires
of
the
could
fail
inflation
to
on
at
of per¬
process
manent
If,
for
or
price adjustment.
the other hand, the need
costly defense should lessen
on
we
should find ways of
provid¬
ing
really
effective
protection
more
efficiently, that is at lower
cost, then we shall face the show¬
down of thoroughgoing business
adjustment to a true peacetime
basis.
This will be a challenge to
management, to labor and to agri¬
culture.
As
we
move
from
the
from
unemployment compensation
impounds purchasing power at the
comes
It
that that
If
the
expect
to follow a pattern set
previous occasions is because
economy
are
The
amount
acceptances of basic economic
realities.
There
are
plenty of
completing
this
a
you
out.
able
.
on
likely to work itself
give which
indication of their probable
effects.
It
is our thought that
some
These
should stand
basis
a
more
reasoning of
methods which of the changes that have taken
in good stead in place in economic institutions in
might otherwise develop at pres¬ identifying and in gauging the the interval.
Perhaps the same
ent levels in the domestic econ¬
intensity of economic forces and economy would operate > in the
in reasoning as to how a
omy.
But "it is elementary,
given same way.
"We, of course, do not expect combination of such forces and Watson," that we don't have the
you to make definite predictions, materials,
same
even though
economy or economic struc¬
complex,
gram
the
sound
a new market priced out of a substantial share
compatible
with of the market, some workers may levels in our domestic economy?"
stabilized prosperity.
find themselves priced out of em¬ His
question recognizes that there
It may
well be argued that ployment unless their wage ideas will be a certain kind of sag in
are
revised or their productivity demand as we
agriculture has for several years
get to the close of
Cost absorption and the
been out of line with the general improved.
catching-up period of filling
profit rates also are involved in pipelines and
economic structure and that the
presage
may
pattern
This sector of
it
European Recovery program and
domestic
audience.
believe in having a margin
of
the
this
safety.
I
in¬
in
ord
in
so
and
on
great
are
peacetime prosperity.
this will require a consider¬
we
not
judgment,
my
elements
situation
reconstruction period onto
But
Here
are
In
basic
of sustained
ment
There
business
our
constructive that it is techni¬
and
excess
the past.
of
cally possible to get off the arti¬
ficial prosperity of the war and
prospective
the
in
work.
broad
economic
It is
a
hangover from the thoroughly
capacity
above
growing popula¬ undesirable "pattern" settlements
of a short time back.
tion with standards of
We should
living ris¬
ing at rates we have experienced examine particular situations, no¬
portant
at
the
Indeed, I depre¬
of this
use
test
productive
factories, further wage increases, but I am
oil wells and refineries,, electric by no means sure that they wil'
power
plants,- and many other assume the magnitude of a
steel
and
reason
High
outlook
seems
of continued
to
On the
continued
inability
Continued
likely than either
runaway inflation.
system seems to me to come in
the longer run rather than in 1949.
But its germs are already present
acute
The
buy
contrary,
product.
of
Employment
untried
or
real
people
Prospects
widely
There
discernible
!
that
labor
any
For the next year
are definitely down¬
but not collapsing and with
of
any
a
not
of
a
total farm income high enough to
continue
an
excellent rural
show
overdevelopment
than
industry
on
1920
are
rather
The
prospect is that agricultural
prices with their important effects
enterprises or of estab¬
lished types of business in excess
along
without'
year
likelihood of serious upset.
judgment of course rests
Such
profession
lems
enable
scarcity level.
industrial
•
abundance
an
ward
will
run,
the
speculative
by
last
the
in
We do not have reck¬
high production and,
well-employed
employment will be dimmed.
to
to
estate, both
They also in¬
With
conditions
prevalent.
or, in terms
question, the outlook
another
have
little examination of
a
present situation
for continued
for
booms
real
rural.
and
its
arrangements
of your first
and
supported
are
continuance of
also
must
other
in
cooperation
age much more
protecting the public— collapse
agriculture
itself—against
undue
enhance¬
ment of agricultural prices in the
boom phase.
While that should
hoarding of stocks.
responsibilities to make favorable
conditions
so-called
and
in this
sense
commodities
compared with cost factors and
as
country. The actual outcome will
depend on importantly how well
the
of
means
observa¬
volve overpricing of
business in this
of
kernel
securities
approaching
engineering
effi¬
ciency. I believe that action holds
a significant
degree of reassurancp
for
practical
very
indicated
history
carefully de¬
time
up
in
is that
one
;
First, I have already
that
as
its
of
commonly involved a large
degree of overexpansion in plant
and
inventory or in particular be attended to in the future, it is
types of plant and inventory as water under the bridge as far a
situation
is
con¬
present
compared with others and in ex¬ the
treme overcapitalization of prop¬ cerned, with its prospect of early
adjustment of agricultural prices1
erties, particularly stock market
to
practical
and
sided in that they did not provide
workmanlike
guide
approach to
Here I want to divide
my sug¬
that objective, it
contemplates an gested answers to the question
you
integrated program for the econ¬ raise
into
two
parts,
applying
omy rather than blind
struggle of roughly to prospects for the next
special
interest
groups.
As
to year and
those for the longerwhat are the
principles of sound term.
Most careful students are
adjustment of the several parts of
agreed, I believe, that the momen¬
our
economic mechanism one to tum of
buyer demands, operative
another,
that
is
the
technical plans and financial
resources are
problem of the economist.
The such
Council
years
The
tional
the
audience
recent
in
the
tion.
farmer
goes
a
been
currents will naturally produce a
that profusion of both plus and minus
agricultural adjustment de¬ signs in the price list, with some
vices so far developed were one¬ further moderate rise in the aver¬
the devil his due, we
recognxze that such cliches
as "The bigger the
boom, the big¬
ger the bust" do not arise without
or
39
ucts and an increasing number of
industrial products.
These cross¬
scientious speaker, and I shall
try
to follow the specifications in a
agencies sets forth
objective of sustained
ing
that
Such
needs
the
has
It
the
several
on
occasions.
conspicuous
give
must
sustained j high employment and
production.
But management, labor and the
prosperity.
power
the
previous
'situation
basis
This brief statement
of the Em¬
ployment Act and its implement¬
ing
of
To
re¬
a
that has undermined
industrial
some
Con¬
it examines the- President's
Economic Report as a
whole, criti¬
cizes its conclusion and recom¬
gress,
with
speech.
a
expectations of
invaluable as a
staff
special
Legislative
for
quest
Actying-out
Vice-
as
small
a
connection
Rep¬
Chairman and
as
in
Sen¬
Representatives, with
Tart
ator
ceived
4)
page
(1571)
unemploy¬
to
about
due
power
covered
indus¬
of
area
buyers'
posed
sellers'
market, business is ex¬
forces of competition
it has been sheltered,
in greater or less degree
seven
that ,of
to
which
from
market to
years.
for some
Some of the parties
(Continued
on
page
43)
%
40
(1572)
THE
COMMERCIAL
Securities
•
&
FINANCIAL
Now
INDICATES
in
ADDITIONS
CHRONICLE
Thursday, October 14, 1943
Registration
SINCE
PREVIOUS
ISSUE
s
,
Air
Commuting, Inc., White Plains, N. Y.
(letter of notification) 1,060 shares of capital
(no par value), of which 600 shares will be sold
publicly at $100 per share, » Underwriter — Burnham &
Co.
Proceeds—To be used to engage in limited helicop¬
June
17
Btock
ter operation over routes which the
company
certificated to fly or in limited helicopter
work.
•
is presently
commercial
stock
(no par).
Price—$2 per share.
To make surveys
and preliminary studies with
respect to timber and wood
pulp, operations. Company will sell stock direct to a
of
group
and
not
25
purchasing
persons
for
same
investment
distribution.
American Steel & Pump Corp. (10/20-21)
Sept. 21 filed 200,000 shares ($2 par) convertible class A
stock. Underwriters—Herrick, Waddell &
Reed, Inc. and
Sills, Minton & Co., Inc. Price—$8 per share. Proceeds
—To retire indebtedness and for
working capital.
-
Armstrong Rubber Co., West Haven, Conn.
June
30
(letter
of
notification) 1,000 shares of 4%%
preferred stock, ($50 par) and
2,000 shares of class A common stock. To be sold at $44
®Ud $11.75,
respectively; This stock is being sold by
James A. Walsh, President of the Company. Underwriter
—F. Eberstadt &
Co., Inc., New York.
cumulative
convertible
Armstrong Rubber Co., West Haven, Conn.
July 8 (letter of notification) 1,000 shares of 4%% cumu¬
lative convertible preferred stock
($50 par); To be sold
<it $44 each for Frederick
Machlin, Executive Vice-Presi¬
dent and Secretary of the
company.Underwriter—
J?. Eberstadt & Co., Inc., New York.
.
•
Aztec Mining Co/of Nevada,
Reno, Nev.
6 (leter of notification}
100,000 shares of common
Oct.
non-assessable stock. Price—25
cents
per share. No un¬
already mined on is¬
suer's property and for
working capital. "/.*•
r
derwriter.
For
mill
tests
of
ore
Berry Motors Inc., Corinth, Miss.
Sept. 20 (letter of notification) 25,000 shares ($10 par)
5% cumulative class B preferred stock.
Underwriter,—1
Gordon Meeks & Co.- For working
capital.
Black
Hills
Power
&
*
S.
Light Co., Rapid City,
Dak.
—
stock
will
be
stockholders and
—For
offered
for
subscription by common
the preferred,to. the public.
Proceeds
construction.
/
,
•
(letter of notification)
common
stock.
1,500,000 shares
Price—20 cents per share.
(5c par)
Underwriter
property and for working capital.
•
Inc., Ada, Okla.
(letter of notification) 300,000 shares (lc par)
common. Price—$1
per share. Underwriter—S. B. Cantor
Co. For,general expenses. ><0{ ,*•
;■•
♦«»-'v- 1
4
..
Brockton.
(Mass.) ■ Edison Co.^<*/
$4,000,000;; first; mortgage and collateral
Sept.; 3 filed
trust bonds, due 1978. Underwriters—Names to be deter¬
mined
by competitive bidding.
Probable bidders: Halsey, Stuart & Co. Inc.; The First Boston Corp.; Kidder,
Peabody
To
pay
&
Co.; Harriman Ripley & Co.
Proceeds—
$2,625,000 of promissory notes and to finance
additional
be
costs
received
and
about
corporate needs.
Oct. 19.
Bids expected
to
Bucyrus-Erie Co., South Milwaukee, Wis.
Sept.
29
filed
320,000
Underwriter—Harris,
be
offered
shares
Hall
&
($5
Co.
par)
common
(Inc.)
stock.
Offering—To
for
subscription by common stockholders.
Proceeds—To pay costs of expansion
program.
•
shares
($25 par)
are
one
new
for each 10
held.; Rights
California Water Service Co.
Oct. 8 filed
$1,500,000 first mortgage 3x/4% bonds, series
C, due Nov. 1, 1975.
Underwriters—Names to be deter¬
through competitive bidding: Blyth & Co., Inc.,
Dean
Walter
&
Co.
(jointly);
Union
Securities
Corp.; Halsey, Stuart & Co. Inc.
ment
of
bank
loans
and
to
Oct. 5 in ratio of
one
share for each 10 shares held.
new
Rights expire Oct. 28. Price—$10 per share. Underwrit¬
ing, none, but The First Boston Corp. has been appointed
agent
;■
-
,
Capitol Records, Inc., Hollywood, Calif.
Sept. 29 (letter of notification) 11,390 shares of common
stock
(250 par).
who holds
to
company amounting
The note is convertible into the company's
stock
common
To be offered by George G. DeSylva,
promissory note of the
a
$140,000.
the rate
at
of
Staats Co.
;
.
shares for each $1,000
134
principal amount of the note,
the public at $8.75 per share.
The stock will be sold to
Underwriter—William R.
'/
;•
..
.
Central Arizona Light & Power Co.
v
..
..
Proceeds—For repay¬
restore working capital for
-outlays put in property additions.
•
California Water & Telephone Co.,
;;
Oct. 6 filed 40,000 shares ($25 par) cumulative pre¬
ferred stock. Underwriter—Blyth & Co., Inc. Proceeds—
To help pay for costs of extensions and
improvements
during this year and next.
.
28 filed 300,000 shares (no par) common stock.
Underwriters—The First Boston Corp. and Blyth & Co.,,
Inc. Proceeds—To be applied on currently outstanding
loans
of
obtained
$3,000,000
from Mellon National
Bank
& Trust
Central Electric & Gas Co.
during
.
Columbia
$40
purposes.
Central
Power
Co.'
1
*
*
v
'f
\
dial
to
"
Crosbie Co. of
-•
■
telephones, expan¬
->/,/
Washington, Inc.
(letter of notification) 50,000 shares of class A
stock ($1 par), 25,000 shares of class B common
(100 par).
Underwriter — James T. DeWitt Co.,
common
York and
Washington.
To reduce
To be offered in units o£
or
one
pay
the
.
•
stock equities
;
.
Maine
general
.-V:';/,''-
Sept. 7
unit.
of its telephone subsidiaries and may be applied in
part
for its own construction program or for other general
corporate
••
share of class B at $5 pep
in full present borrowings from
Manufacturers Credit Corp., to reduce the present
current liability position and to
provide additional work¬
ing capital. •
•'
'
••
(10/15)
common
Conversion
two shares of class A and
Proceeds—May be used in
making additional investments in
Proceeds—For
(Pa.)
share.
per
New
—
Webster Securities Corp.
subscriptions.
Telephone Co.
Sept. 21 (letter of notification) 3,000 shares of common
stock (par $25).
Price—$40 per share. Stock is being
offered to stockholders of record
Sept. 17 on basis of
three new shares for each 10 shares held.
Rights expire
Nov. 1.
Three of the officers have agreed with com¬
pany to purchase ^rd each of unsubscribed shares at
stock
1948
Co. of Pittsburgh.
Sept. 9 filed 30,000 shares of $2.50 cumulative convertible
preferred stock (stated value $50 per share).
Under¬
writers
Paine, Webber, Jackson & Curtis and Stone
&
solicit
funds to be used for construction.
Sept.
construction
to
sion, etc.
(10/2D)
-
Deshler
•
,
(Neb.)
Broom Factory
-
Oct 5,/(letter of
notification) 2,000 shares of 5% pre*
ferred stock and 1,000 shares of common stock. Price—
*
$100
share for each class. No underwriter. To build
per
buildings destroyed by fire, to replace equipment de*
stroyed by fire and to purchase new equipment.
Rov. 10 filed 160,000 shares ($10 par) common. Under¬
writing—Company called for competitive bids Dec. 8,
1947 and only one bid, that of Blyth &
Co., Inc. and
Kidder, Peabody & Co. was submitted and was rejected
by the company.
They bid $13.75, less $1.75 under¬
writing commission. Offering—To be offered to 6% pre¬
(letter of notification) $100,000 of 5-year 5%
convertible debentures, with non-detachable stock pur¬
chase warrants; 10,000 shares of common stock
($1 par)
ferred and
reserved for conversion of
basis
of
ferred
each
stockholders for subscription on the
of new common for each pre¬
common
one-half
share
share
one-tenth
and
common
share
of
new
common
for
share held. Price by amendment. -Proceeds
—for construction and repayment of bank loans.
Central
Power &
Douglass
($1 par)
Dynacycle Manufacturing Co., St. Louis, Mo*
Sept. 3 filed 100,000 shares (80c par) common stock.
$100,000),
Co.; Dewar, Robertson & Pancoast negotiated a pur¬
1948, but the SEC on July 27,
1948, concluded that financing by'the proposed preferred
Central
Printers, Inc., Sioux Falls, S. D.
(letter of notification) 990 shares of class A com¬
(par $100); 10,000 shares of class B common
stock (par $10) and 1,000 shares of class C common stock
(par $1). Price, par for each class. No underwriter. To
purchase land, buildjngs, equipment and services needed
Oct. 8
stock
•
printing.
Central States
Cooperatives, Inc., Chicago, III.
(letter of notification) 41 % shares of preferred
stock (par $100).
Price, par.
No underwriter.
To re¬
tire Outstanding trade
notes./
.V'*">m i"1•"i'; *
Oct.
8
.."'.Century Electric Co., St. Louis, Mo.
August 23 (letter of notification) 25,000 shares ($10 par)
common
ord
stock/ Offering—Common stockholders
Sept. 7 will be given right to subscribe
Oct.
held
29
on
rec¬
at
$12 per
working capital.
one
share
new
share.
No
for
on or
each
underwriter.
To
21
shares
Products, Inc., Brooklyn '
Aug. 3 (letter of notification) 25,000 shares of common
stock and 20,000 warrants.
Offering—10,000 shares and
15,000 warrants to be offered in units (one common
share and IV2 warrants) at $2.75 per unit, the balance
of 15,000 shares being reserved for exercise of 15,000
warrants, purchasers of which will have the right for
four years to purchase shares at $2.75 per share.
Gen¬
eral corporate purposes.
Underwriter—Dunne & Co.,
New York.
from
Co., St. Louis.
Price—$5
additional amount which
an
the
franchises (estimated at
company's general funds.
About $230,000 would be used to purchase equipment
and $185,000 for working capital,
i *
/ /
V
will
be
sale
per
may
added
of
to
.
,
Employees Credit Corp., New York <
Sept. 24 filed 20,000* shares* of $1.50 prior convertible
preferred stock, series A (no par) and 20,000 shares of
Class
A
stock ($2 par).
Underwriter—E. H.
Sons, Inc.
Proceeds—To retire 2lk% term
loan, amounting to $225,000, held by Marine Midland
Trust Co., New York, and balance for general funds.
Rollins
common
&
Family Finance Corp.
Sep. 2 filed 25,000 shares of 4% % cumulative preference
stock, series A (par $50) (convertible to and including
Aug. 1, 1956) and, 97,580 shares ($l,par) common,stock
to be reserved for conversion of the preferred stock.
Underwriter—E.
H.
Rollins
&
Son, Inc.
reduce
outstanding bank loans
Temporarily postponed.
Ferro
Enamel
and
Proceeds—To
commercial
paper.
:
—To be offered for
Corp., Cleveland, Ohio
common shares ($1 par).
Offering
subscription by stockholders in ratio
shares
Sept. 17 filed 79,080
one
additional
for
each
four
shares
held.
Underwriter—Merrill
Lynch, Pierce, Fenner & Beane.
Proceeds—Company and subsidiaries will use the funds
for
general corporate
purposes.
First Guardian Securities
Offering postponed.
Corp., New York City
June 4 filed 36,000 shares of 5%
preferred stock
($25 par)
cumulative convertible
and
172,000 shares ($1 par)
(72,000 shares of common to be reserved
for conversion of the preferred.)
Underwriter—None,
Price—$25 a share for the preferred and $10 for the com¬
common
stock..
mon.
Clarostat
Mfg. Co., Inc., Brooklyn, N. Y.
Aug. 26 (letter of notification) 37,400 shares of 500
cumulative convertible preferred stock.
UnderwriterCantor, Fitzgerald & Co., Inc., New York. Price—$8 per
share. Working capital, etc.
Colonial Candy Corp., Morgantown, W. Va.
Sept. 17 (letter of notification) 100,000 shares ($1 par)
stock.
Price
$2
—
Grubbs, Scott & Co., Inc.
new
obtained
before
increase
Chieftain
common
be
Sc
Proceeds, plus
of
of
basis
of
Inc.,; Portland,
Underwriter—Minot, Kendall & Co. For working capital.
&
chase contract in April,
Co.,
debentures, and 10,000 shares
stock reserved for exercise of warrants*
common
Underwriter—White
Light Co.
;
16
share.
mon
Manufacturing
Maine
Aug.
Nov. 21 filed 40,000 shares ($100 par) cumulative pre¬
ferred. Underwriters—Lehman Brothers; Glore, Forgan
mined
and
Columbia Gas; System, Inc., New York
Sept. 16 filed 1,223,000 shares (no par) common stock,
Offering—Offered for subscription by holders of 12,229,874 outstanding shares of common stock of record
expire Oct. 18. Western Utilities Corp., owner of over
%rds of stock, will exercise its rights. No underwriter.
to carry on
Britton Oil Co.,
»/.
Co.
12,800
Price—$23 per share.
Stockholders of
given the right to subscribe to the
Sept. 10
shares in ratio of
new
•
—Batkin & Co., New York.
To repair and renovate mine
of company and to exercise option to
purchase processing
mill and move and erect such mill on the
company's
Oct.
stock.
stock issue is not necessary.
Bradshawt Mining Co., Tonopah, Nev.
"Oct. 8
record
^
Oct. 5 filed 33,730 shares
($1 par) common stock and
5,000 shares of ($100 par) cumulative preferred stock.
Underwriter—Dillon, Read & Co. Inc. Offering—Com¬
mon
(letter of notification)
For construction.
Postponed indefinitely.
Alaska Industrial Corp., New York
8 (letter of notification); 18,075 shares of common
Oct.
California Water & Telephone
Sept. 9
common
per
To
share.
Underwriter—
past expenses and for
pay
equipment.
•
Florida
Oct
5
stock
Telephone Corp., Ocala, Fla.
(letter of notification) 28,500 shares of common
(par $10). Underwriter—Florida Securities Corp.,
St. Petersburg, Fla. Price—$10 per share. For an
expan¬
sion and modernization program.
Gauley Mountain Coal Co., New York
'
13 (letter of notification) 6,093 shares of capital
stock
(par $10).
Price, par.
Stockholders of record
Sept. 1 will be given right to subscribe at rate of one
Aug.
l.rn
-
ABC VENDING
CORPORATION
COMMON
Bought
STOCK
Sold
—
Prospectus
'
Quoted
—
request
on
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Reynolds
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New York
Boston
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Pittsburgh
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A
Volume 168
;
COMMERCIAL
THE
Number 4742
•
Investors
Oct.
NEW ISSUE CALENDAR
October
Illinois
Central
a.m.
October 15,
Electric
Central
Interstate
Gas
&
Bonds
1948
Preferred
Co
Co
Power
10 years,
1948
Public Service Co. of N. H,, Noon (EST)
Youse (E. S.) Co., Inc._.,___
Public Service Co. of Colorado,
11
October 20,
American
Steel
&
Central Arizona
Common
Iowa Public
Probable
&
,
A.
United New Jersey RR. &
Noon
(EST)
will be
Canal Co.,
share
•
Preferred
Rights expire Oct.
General improvements, etc.
Price—Market
(approximately
•
&
Co., St. Louis, Mo.
Co., New York.
11:30
$9.75
per
Michigan
Battle
Corp.,
com-
shares
stock
held.
Price—By
expansion
Offering postponed.
and
Hooker
N.
of
Electrochemical
Co.,
Niagara
Official
facilities.
of
held.
Co.
Proceeds—Will
be
Bids
Films,
Inc.,
New York
corporate purposes.
Underwriter
Corp., New York.
/
;/
Falls,
—
Aetna
Securitie*
one
new
share
Proceeds—For
and
facilities
and
for
each
capital
16
shares
additions
of
Oklahoma
to
&
Gas
Electric Co.
Sept." 13 filed 250,000 shares
com¬
to
plants
provide for changes in equipment)
Old
24
a
,
'•/•'• •/
Sept. 10 filed $5,000,000 first mortgage bonds, due 1978.
Underwriter—Halsey, Stuart & Co. Inc. on Oct. 13 bid
.100 for a 4V2% coupon. Offering expected Oct. 15 at 103.
(10/15)/
•
Proceeds—Of the proceeds, $2,400,000 is to be applied to
prepayment of promissory notes, $1,400,000 will pay in
full the $724,446 balance on a lease and
purchase agree¬
ment and for
property additions; and $1,200,000 will be
deposited with corporate trustee under bond indenture,
available for withdrawal against
property additions.
■/■'/
—
ward
$100,000,000 construction
program.
Peoples Gas Light & Coke Co.
Sept. 24 filed $16,400,000 3% convertible debentures, due
Dec. 1, 1963/ Underwriters—Competitive bidding will
determine the names of the underwriters who will pur¬
chase unsubscribed debentures. Probable bidders: Hal¬
sey, Stuart & Co. Inc.; The First Boston Corp.; Glofe,
Forgan & Co. Offering—To be first offered for subscrip¬
tion by stockholders dn ratio of$100 of debentures for
each four shares held of record
Oct. 22/ Rights will ex¬
Price, par (flat).
Proceeds—For construc¬
tion and for the purchase of additional
capital stock of ;
certain natural gas companies.
pire Dec. 1.
Plywood Inc., Detroit, Mich.
Oct. 8 filed $500,000 of 5%
sinking fund debentures, due
Aug. 1, 1967, with detachable warrants to purchase 50,000
shares of
common
Co., Inc.
stock.
Underwriter—P. W. Brooks &
Proceeds—For additional working capital.
Public Service Co. of Colorado (10/19)
Sept. 17, filed $10,000,000 first mortgage bonds, due 1978,
and 66,000 shares of cumulative convertible
preferred
stock ($100 par).
Underwriters — Names to be deter¬
mined
through competitive bidding.
Probable bidders:
Halsey, Stuart & Co. Inc. (bonds only); The First Boston
Corp. (bonds only); Glore, Forgan & Co. and W. C. Langley & Co. (jointly on both); Harris, Hall & Co. (Inc.)
(both); Lehman Brothers (bonds only); Kidder, Peabody
& Co.
(bonds only); Blyth & Co., Inc. and Smith Barney
(stock only); Eastman, Dillon & Co. (stock only).
Proceeds—To provide part of the costs of construction.
& Co.
upHo 11
(EST) Oct. 19.
a.m.
Public Service Co. of New
Hampshire (10/18)'
$7,000,000 first mortgage bonds, series D,
Sept. 9 filed
due
1978.
Underwriters
—
Names
will
determined
be
through competitive bidding.
Probable bidders: Halsey,
Stuart & Co. Inc.; Kidder, Peabody & Co. and Blyth &
Co., Inc. (jointly).
Proceeds—Of the proceeds, $3,600,000 will be applied to the reduction of outstanding shortterm bank
borrowings/ $3,400,000 will be deposited with
trustee, available for withdrawal against
additions.
Bids—Bids for purchase of bonds
will be received at company's office, 1087 Elm Street,
Manchester, N. H., up to noorf (EST) Oct/18.
the
indenture
property
Quebec
Oil Development Ltd., Montreal, Cat;':*
filed 2,000,000 shares of capital stock, J($l par
Canadian funds).
Underwriter—Hiscox, Van Meter &
Co., Inc. Price, $1 per share (United States funds). For
Aug.
4
each
20,000 shares of stock sold, the company will de¬
to the underwriter stock purchase warrants en¬
titling the holder to purchase, on or before Sept. 1, 1950,
1,000 shares of capital stock of the company at $1.50 per
liver
share.
•
Proceeds—For drilling operations.
San
Oct.
Diego Gas & Electric Co.
filed
8
350,000
Underwriter—Blyth
$3,200,000
bank-loan
shares
&
Co.,
notes
($10
par)
common
stock.
Inc.
and
Proceeds—To retire
to reimburse company
before Sept. 2 for acquisition of
•
Schrader
(H. J.)
& Co.,
South Bend,
Ind.
State
Insurance
B (no par) common. Underwriter—Harrison & Austin,
Inc., South Bend, Ind. Price—Preferred par; common 25c
share. For working capital and to carry conditional
sales contracts.
(par $5).
;
•,
Shoe
Corp. of America, Columbus, 0.
June 28 filed 25,000 shares of cumulative preferred stock
(no par), with class A common share purchase warrant#
attached and 25,000 shares of common stock reserved for
Underwriter—Lee Higginson Corp.
general corporate purposes. Indefinite.
warrants.
Co.
shares of capital stock
100,000
Oct. 5
—For
Proceei!®
Sightmaster Corp., New Rocheile, N. Y.
Sept. 24 (letter of notification) 99,000 shares of common
13,333 shares will be purchased by underwriter for pub¬
lic or private offerings; and the remaining 40,000 sharef
will be publicly offered on a "best efforts basis" on
Price—$300 per unit, consisting of two shares of
preferred and 10 shares of common stock.
Proceeds—To
Interstate Power Co.
filed
per
share.
Underwriter—First Securitiei
Durham, N. C.
Offering—26,667 shares will be
initially offered on a "when, as and if issued" basis;
Moht.
■
North
Corp.,
Co., Missoula,
,
Pennsylvania Power & Light Co. (10/21)
Sept. 28 filed 63,000 shares ($100 par) preferred stock.
Underwriters—Drexel & Co., Philadelphia and The First
Boston Corp., New York.
Price and dividend rate will
be filed by amendment.
Proceeds
To be applied to¬
Price—$15
May. 17 filed 100,000 shares of 4% cumulative preferred
($100 par) and 500,000 shares ($10 par) common
stock
sulphate pulp mill with
purposes.
per
,
/./ Idaho-Montana Pulp & Paper Co., Poison, Mont.
erect and operate a bleached
200-ton per day capacity.
outstanding debenture bonds, to pay the bal¬
of the present bank loan and for general corporate
ance
competitive bidding. Probable bidders: The First Boston
Corp. and Merrill Lynch, Pierce, Fenner & Beane; .Blyth
& Co. and Lehman Brothers; Smith Barney & Co. and
June
Tom G. Taylor &
//■
•;
(letter of notification) 1,000 shares of 6% cumula¬
tive preferred stock (par $100) and 37,500 shares of class
owns
Ripley & Co. (Jointly); Otis & Co,
Bids—
Bids for purchase of stock will be received up to noon
Oct. 20 by Standard Gas & Electric Co., Room 1338,
15 Broad Street, New York.
.
—
Co., Los Angeles,
(letter of notification) 2,000 shares (no par) com¬
stock.
Price—$50 per share.
No underwriter. To
stock.
750,000 shares of company's common will receive .the pro¬
ceeds.
Underwriters—Names to be determined through
Hygenic Service Co., Boulder, Colo. ;
•'
August 16 (letter of notification) $50,000 first mortgage
,5% 20-year (closed) bond issue. Underwriter—E. W.
Hughes & Co. For new plant construction and improve¬
ment of existing plant.
Underwriter
Outdoor Advertising
'
//■/
California
common
Harriman
stock.
Pacific
property and for property additions and improvements.
(10/20)
($20 par)
Offering—Standard Gas & Electric Co. which
processes.
and
•
for expenditures made
Y.
50,262 shares of cumulative second preferred,
common stock before Dec. 1,
1958).
Underwriter—Smith, Barney & Co.
Offering—
To be offered for subscription by common holders on
basis
&
July 16 (letter of notification) 49,000 shares 350 cumula¬
tive preferred stock (par $5) and 49,000 shares of com¬
mon
stock (par 100).
Price—$6 per unit, consisting of
one
share of each.
Working capital and other general
series A (convertible into
mon
Ripley
expepcted about Oct. 26.
Oct. 6 filed
a
Harriman
Brothers;
amendment.
manufacturing
be determined' by competitive
used for construction and other corporate expenses.
Underwriter—A. G. Becker & Co. will acquire the un¬
subscribed shares. Proceeds—To be used in part for im¬
provement
(10/26)
bonds,^duer 1978.
Halsey, Stuart & Co. Inc.;
Kidder, Peabody & Co.; The First Boston Corp.; Lehman
filed
common
Inc.
bidding/ Probable bidders:
share.
of
Public Service
Underwriters—Names' to
Creek, Mich. Price—
$2,500,000 of loans owing to the First Na¬
tional Bank of Minneapolis and for betterment of facili¬
ties. 77777
York,
common
Sept. 23 filed $10,000,000. first mortgage
^Underwriter--
Fergus Falls, Minn.
Bids—Bids for purchase of securities will be received at
office of Guaranty Trust Co., 140 Broadway, New
Co.
„
New York, N. Y.
59,579 shares of cumulative convertible
preferred stock (no par) to be offered common stock¬
holders in the ratio of one share of preferred for each 20
29
Machine Tool
New Orleans
Heyden Chemical Corp.,
June
Oct. 19 at Room 2315, 195 Broadway,
13 filed 26,000 shares of
Hastings (Mich.) Manufacturing Co.
of
(EST)
14 filed 65,000 shares ($50 par) convertible pre¬
stock.
Price and dividend, by amendment.
Un¬
derwriters—Goldman, Sachs & Co., New York; Piper,
Jaffray & Hopwood, Minneapolis. Proceeds—To retire
$3,000,000 of bank loans and general corporate purposes.
Temporarily deferred.
'
Grand Stares Co., San Diego, Calif.
8 (letter of notification) 8,000 shares of ($1 par)
common stock, to be sold by Harlan B. Eldred. No under¬
writing.
•
First
Under¬
by
ferred
r
Oct! 4 (letter" of notification) 1,000 shares'($2 £ar)
40-year
determined
July
*.
W.' Dolan;
be
•National Battery Co.
Oct.
of C.
to
stock ("no- par)".
Underwriters—F. Eberstadt & Co., Inc. and Prescott,
Hawley, Shepard & Co., Inc. Proceeds—Stock being sold
by certain stockholders. Offering indefinitely postponed.
•
behalf
$75,000,000
(10/19)
debentures.
York.
Sept.
stock, 'on
of
Monarch
Goldsmith Bros. Smelting & Refining Co.
Sept. 27 filed 100,000 shares ($3.50 par) common stock,
of which 54,000 shares will be sold by the company and
46,000 by selling stockholders. Underwriter—A. C. Allyn
& Co., Inc.
Price by amendment. Proceeds—Company's
rmon
filed
a.m.
New
purposes.
_
of. notification)
(letter
17
Proceeds—For general corporate
proceeds for working capital.
Hauai,
competitive bid¬
ding.
Probable bidders: Halsey, Stuart & Co. Inc.; Mor¬
gan Stanley & Co.
Proceeds — To repay advances from
American Telephone & Telegraph Co. (parent), which
are expected to be about $81,500,000 by Oct. 19.
These
advances were used for general corporate purposes, in¬
cluding construction, additions and improvements.
Bids
-—Bids for purchase of debentures will be received up to
izing the purchase of 45,000 shares of common stock.
Underwriters—Dempsey-Tegeler & Co. and J. W. Brady
&
of the stock, will purchase its pro rata
stock and take all unsubscribed shares.
($1 par)
writers—Names
stock to be offered at par and warrants author¬
common
(letter
30
Sept.
$20.50
Engineering & Manufacturing Co., St.
Louis, Mo.'
(letter of notification) 295,000 shares ($1 par)
8
Price of stock
Sioux City Gas & Electric Co.,
Michigan Bell Telephone Co.
General
Oct.
retirement of
one-
ing capital.
per
Underwriters
share). Proceeds—To selling stockholders.
—A. M. Kidder & Co. and Cohu
of
Inc., Baltimore, Md. 7>
notification) 1,000 shares (no par)
common stock and
2,500 shares of 5%' cumulative pre¬
ferred stock (par $100).
Price—Common $50 per share,
preferred $100 per share.
No underwriter.
For work¬
Gauley Mountain Coal Co., New York
Oct. 8( letter of notification) 2,000 shares of capital stock
$10).
new
rate
at
plastic plant, restore
working caoital.
-3 ::
Sept. 27 filed 141,490 shares ($5 par) common stock.
Underwriting—Names by amendment (probably Glore,
Forgan & Co. and Kalman & Co.).
Proceeds—For
McCormick & Co.,
Sept.
+
1;(par
4
Engineering Works, Ltd., Lihue,
Hawaii ,7.'77/=/7*7 // '■/:/*/7.7 ; •
8
,
Debentures
share for each five shares held.
Underwriting—None.
Nov.
new
new
retire the
300,000 shares of non¬
common stock.
Price, par. No un¬
derwriting. For construction of tuna cannery and partial
financing of three fishing boats. 7
7/;,
Public Service Electric & Gas Co
15.
less than $15.
of the
assessable
Equip. Trust Ctfs.
7/77->,'7 November 22, 1948
new
record
Kauai
Oct,
___Bonds
27, 1948
Chesapeake & Ohio Ry.i_
City, Iowa
share for each share held.
new
no
/,'7
October 26, 1948
October
a
of
Power Co.,
41
Oct. 7
Proceeds—For construction program.
Inc.___^^
Otter Tail
minimum
bidders:
of 61.2%
owner
Bonds
21, 1948
Pennsylvania Power & Light Co.-.
iNew Orleans Public Service,
in
$1,000,000.
amount,
Service Co., Sioux
stockholders
sixth of
October
•7:/^/V/7?
issued
Glore, Forgan & Co.; Halsey, Stuart
Co. Inc.; Kidder, Peabody & Co.; White, Weld & Co.;
C. Allyn & Co.; Harriman Ripley & Co.; Salomon
common
Common
(EST)___Stock
1
Proceeds—To defray cost of
working capital and provide
instalment invest¬
were
be
& Hutzler; Otis & Co.; The First Boston Corp.
Offering—The stock will be offered for subscription by
Pump Corp.______Class A Stock
Light & Power Co
to
Bros.
1948
Oklahoma Gas & Electric Co., Noon
12
Sept. 24 filed $3,000,000 first mortgage bonds, due 1978,
and 109,866 shares ($15 par) common stock. Underwriters
—Bonds
will
be
offered
under
competitive bidding.
Bonds and Preferred
(EST)--
a.m.
series
(1573)
mon
Debentures
Common
Minneapolis & St. Louis Ry
respectively; also filed
denominations of $2,000 face
Bonds
1948
Michigan Bell Telephone Co.,
11:30 a.m. (EST)__-
face amount, $1,000,000;
certificates
ment
October 18,
October 19,
of $2,000
tinued after maturities of additional periods of four and
Bonds
-—
Inc.
instalment
series 15 to be
issued in minimum denominations of $2,000 face amount,
$47,000,000; series 20 to be issued in minimum denomi¬
nations of $3,000 face amount, $88,000,000; series 15 and
20 provide that instalment payments thereon may be con¬
___Equip. Trust Ctfs.
(EST).:__,
Syndicate of America,
CHRONICLE
series 10, to be issued in minimum denomina¬
company,
tions
FINANCIAL
investment certificates plus op¬
insurance policy issued by unaffiliated insurance
1
tional
14, 1948
RR.____._..
Virginian Ry., 11
filed
&
shares
(par 25c) and options for the purchase of 25,000
(owned by Michael Kaplan) at end of 13 months
after
public
completion of the subscription of the first 40,000 shares
and the company's receipt of a license to do business in
North Carolina.;
Proceeds—For general business pur¬
poses.
7 ■ 7' )7'77 ,--,-7 7.-V7-:7 7.
■ 37777::;*
corporate
O'Sullivan
Sept.
27
filed
Rubber
325,000
Underwriters—There
Corp., Winchester, Va.
($1 par) common stock.
underwriters but C. F. Cas-
shares
are
no
sell & Co.,
Inc., Charlottesville, Va., and Gearhart & Co.,
Inc., New York, will solicit subscriptions from common
stockholders.
Offering—Of the total' 278,318 shares will
be
offered
to
common
shares for each
one
stockholders
held
on
at
rate
Oct. 7. Price, by
of
two
new
amendment.
stock
offering
of
Willis E. Burnside & Co.
99,000 shares.
UnderwriterPrice—$3 per share.
General
purposes.
Sioux
City
(Iowa)
Gas & Electric Co.
/,7/
Sept. 21 filed 71,362 shares of common stock (par $12.50)/
Underwriting—None.
Offering — Holders of common
stock of record Oct. 15 will be entitled to subscribe to
the new shares in the ratio of one-fifth of a share of ad¬
ditional common for each share held.
Proceeds — To,
a portion of the sums required to make a further'
investment in the common stock of Iowa Public Service
provide
Co.
and
to
pay
Bankers Trust
/■
in full
: :
Co.
or
reduce
a
$1,800,000 note to
7
(Continued on page 42)
.
,
42
f..-
Southern
Colorado
Power
Co., Pueblo, Colo.
Oct. 8 (letter of notification) 34,067 shares of common
stock (no par).
Offering—To, be offered to holders of
outstanding 476,939 shares of common stock on basis of
one share of new common stock for each 14 shares of
stock
held.
•
Price—$8.50
•
Southern Oil Corp.,
Oct.
shares
Wiegand
Jackson, Miss.
(par lc)
•
Co., Inc., Bladensburg, Md.
notification) 9,612 shares ($25 par) com¬
mon stock. Price, at par. Underwriter—Johnston, Lemon
& Co., Washington, D. C. For additional working capital
for the construction and completion of the company's
Oxygen
Yankee
Jersey
for
(letter of notification) $150,000 20-year 5%%
sinking fund debentures.
Price—102.
Working capi¬
tal, etc. Underwriter—Fidelity Securities & Investment
Co., Inc., Asbury Park, N. J.
Power
Water
•
Minnesota
•
Oct.
12
_
some $6,500,000 bonds.
Probable bidders: Shields
Co.; The First Boston Corp.; Halsey, Stuart & Co.
Inc.; Lehman Brothers; Kidder, Peabody & Co.
&
•
&
beau
gypsum
into
four
Douglass.
common
Los
•
branch store in Lancaster, Pa,
new
of
Co. and Lehman Brothers
•
Co.,
Rapids
Cedar
•
v
any
•>
Shelfmar Products
28
in
•
(jointly).;/ V
certificates. Probable bidders: Halsey,
Inc.; Salomon Bros. & Hutzler; Harris, Hall
July 29 filed 41,000 shares oi 5% cumulative convertible
preferred stock ($10 par).
Underwriters—George R.
Cooley & Co., Inc. Herrick, Waddell & Reed, Inc., have
withdrawn
as
underwriters.
Proceeds—For general cor¬
Upper Peninsular Power Co.
Sept. 28 filed 200,000 shares of
Underwriters
—
stock (par $9).
common
Names to be determined through com¬
petitive bidding. Probable bidders include Kidder, Peabody & Co., Merrill Lynch, Pierce, Fenner & Beane and
owners
Western Air Lines, Inc.,
The
the
do
to
down
bilant
appeared
as
one
likely
with
basic
of the least
Today, bankers were scheduled
an offering of $9,500,000
the
of
outlook,
situation
government
more or
productive of the year.
the immediate
over
what
schedule for to¬
on
week
market
still
effects
ginia^ Railway,
sandwiched; in
with this
between
I offerings of equipment
years
new
more
bark upon
The
new
most to
a
issue market
came
al¬
complete halt this week
the Columbus Day
holiday cut
pretty much into the middle of
things.
The first half of the pe¬
riod was bare of anything in the
way of new underwriting except
yesterday's sale of $5,000,000 of
as
Interstate
bonds
and
Power
Co.
$1,500,000
mortgage
equipment
Jersey.
a
Not
or
this
certificates
less
usual
kind,
was
and,
as
results
Illinois
was
Central
slated
Railroad
receive
to
of
$5,500,000
bids
to
also
today
equipment
its
trusts with the size of this
bank
The
Treasury, however,
matter of fact, even with
the several small corporate un¬
naturally auguring for keen com¬
reluctant
suggestion
Underwriting
moment,
r
are
bankers,
for
certificate
the
..
«tV--
A
-
go
along
in
that it
rates
let
move
(jointly).
settle
down
of heavy
from
the
bank "unload¬
occa¬
bill
'
a
for
4
their
set
aside
things
company's
big New Jersey utility an¬
a week ago, plans to seek
bids for an issue of $50,000,000 of
15-year debentures. It previously
had projected the financing on a
to
include
bonds
and
pre¬
situation
ideas
as
over
of
will
until Nov. 22
some
five
have
from
next, a period
Weeks
to
look
the
decide
and
on
their
to pricing of the new pro¬
posal.
Oklahoma Gas & Electric
&
of
portions
of
Oklahoma
the
Co.
Electric
to
its
Standard
proposed
Gas
Gas
revise the pro¬
sale
Electric
&
of
Co.
stock and to forego nego¬
sale removed the necessity
common
tiated
for
an
SEC
ruling
and ended the
It
dicates, at
on
the matter
hearings.
now appears
that three syn¬
least, will be in the
running for the block of 250,000
shares the parent company now
proposes
to sell.
And
there
are
indications that the call for bids
probably will set
fortnight
It
tion
had
to
a
date about
a.
hence.
been the
market
original inten¬
400 000
the stock, but the
ferred stock.
new
.
Public
Co., only
by
The
Underwriters
bit
sale
Electric
tenders
&
nounced
and
more
up
Gas
latest proposal.
basis
the
up
(10/14)
restore working capital.
Probable bidders: Hal¬
Stuart & Co. Inc.; Harriman Ripley & Co.; Shields
& Co.; Kidder, Peabody & Co. and
White, Weld & Co.
(jointly); Lehman Brothers and Bear, Stearns & Co.
in connection with that
,
(10 20)
to
have ample time to weigh
seems
with
farther, presumably being
not particularly ju.
to
have
the
sey,
without consideration, will at least
reserve
terest rates.
project
to
the
require¬
ments which, for the moment at
least, has forced the. New York
banks into a deficit position in re¬
serves,/ it has approached
the
Treasury, according to reports, for
a
new markup
in short-term in¬
bring out some likely bidding.
for
its
of
member
is
in flotations
expected
seems, with
recent markup
satisfied, it
managing
are
gage
ties
put
up
receive
sions of entering bids for securi¬
petition.
^trusts of Central Railroad of New
As
of
more
of
of
Railway, involves $17,720,-
000
Railway
will
Bankers who went through the
Service
taken
of $9,500,000
for
the latter under¬
takings, that of the Great North
ern
sale
procedure on two previous
as a part of its program
beating back the drive of in¬
be
bids up to 11 a.m. Oct 14
first lien and refunding mort¬
bonds, series C, dated Oct. 1, 1948, due Oct. 1, 1973.
Proceeds will be used to pay off short-term bank notes
company
Decision
flation.
Largest
Virginian
Public Service Electric & Gas
or less willing to em¬
something of a "war of
to
Co.; Shields & Co; Kidder, Peabody & Co.
White, Weld & Co. (jointly).
nerves"
trust cer¬
tificates.
slated
Rippley &
and
of Nerves
The Federal Reserve Board ap-
issue
two
is
of the United New Jersey RR. & Canal Co. Bonds will
be dated Oct. 1, 1948 and mature Oct.
1, 1973. Probable
bidders include: Halse.y, Stuart & Co.
Inc.; Harriman
ing" made necessary by the hike
in required reserves.
less in a state of "flux."
War
stock
common
mind to let the government
market
to bid for
j of mortgage bonds of the Vir¬
a
the
in
The
by
Pennsylvania RR. will receive bids up to noon
(EST) Oct. 20 at Room 1811 Broad Street Station, Phila¬
delphia, for the sale of $6,487,000 general mortgage bonds
and
1, 1949, to Aug. 1, 1957. Probable bidders: Halsey,
Stuart & Co. Inc.; Harriman Kippley & Co. and Lehman
Brothers
(jointly); Salomon Bros. & Hutzler; Harris,
Hall & Co. (Inc.); Kidder, Peabody & Co.
Los Angeles, Calif.
dertakings
14 for the sale of
Feb.
Sept. 29 filed 215,597 shares of capital stock (par $1).
Offering—William A. Coulter, former director, is offer¬
day
(10/14)
$5,500,000 equipment trust certificates, series AA, to be
dated Oct. 1, 1948 and to mature semi-annually from
11,200 shares.
Line
United New Jersey RR. & Canal Co.
for the
will receive bids Oct.
company
Pine
The
The
Illinois Central RR.
Gas
Stone
& Webster Securities Corp.
transaction, according to reports.
with funds required for construction,
Peabody & Co.
Paine, Webber, Jackson & Curtis (jointly). Proceeds—
Will go to selling stockholders. Consolidated Electric &
Gas Co. and Middle West Corp. will sell 120,000 shares
and 34,000 shares, respectively; Copper Range Co., 34,000
shares and several individual
The offering, which is designed to pro¬
(10/14)
The company has issued invitations for-bids to be.received Oct. 14 for $12,720,000 equipment trust certificates,
to mature in 30 equal semi-annual instalments beginning
March 1, 1949, and ending on Sept. 1, 1968.
Probable
bidders include:
Halsey, Stuart & Co. Inc.; Salomon
Bros. & Hutzler; Harris, Hall & Co. (Inc.); Harriman
Ripley & Co. and Lehman Brothers, (jointly); Kidder,
A
at present.
stockholders, but the preferred, carrying
common
stock warrants, is to be offered to the public
probably by mid-November.
White, Weld & Co. and
Great Northern Ry.
porate purposes.
no
Trans-Continental
privately
probably will be ready for the market about the end of
November, it is said. Probable bidders: Halsey, Stuart
& Co. inc.; Morgan Stanley & Co.; Blyth & Co., Inc.
United Utilities & Specialty Corp.
:
to 1,000,000 shares ($6 par).
Man¬
plans for issuance of either the second
common
or common
investors.
bonds.
Corp., Mt. Vernon, O.
Financing of the 1,840-mile pipeline by which com¬
pany intends to transmit natural gas from Texas to the
New York Metropolitan Area will
require the issuance
of bonds and stocks totaling,
$191,500,000, it is stated.
Company's present plans, it is said, call for registering
with the SEC by Oct. 19 issues of
$26,500,000 of preferred
stock and $22,000,000 of common stock.
Bonds totaling
$143,000,000 are to be. placed privately with institutional
Dayton
new
of
stockholders
preferred
(Inc.).
vide the company
Commissioners
j
a reg¬
approval of
New Jersey
Corp.; Kuhn, Loeb & Co. and Lehman Brothers
(jointly). Bids expected to be received Nov. 22..
agement has
Power & Light Co.
Oct. 12 reported company has plans for sale of $15,000,000
time before redemption on a
share-for-share basis for common stock ($10 par). To be
offered at $25 per share without underwriting.
To in¬
crease capital and surplus!
ilege of conversion at
Co.
file
soon
seek
and
ton
authorized
Chicago
Stuart & Co.
&
Utility
SEC
will vote on creating a- new class
stock, and also increasing the common.
If
amendment is adopted, company will authorize 200,000
shares
of
second
preferred
($50 par)
and
increase
equipment-trust
Casualty
(letter of notification) 10,000 shares of con¬
vertible cumulative preferred stock ($10 par), with priv¬
August 18
Public
the
of preferred
St. Paul Minneapolis & Omaha Ry.
Oct. 11 company asked ICC permission to issue $2,100,000
wallboard and lath plant in Phoenix, Ariz.
United
of
with
Oct.
Chesapeake & Ohio Ry. (10/27)
12 company asked the ICC for authority to issue
$4,200,000 equipment trust certificates. The certificates
will be put up for competitive sale on Oct. 27.
Probable
bidders: Halsey, Stuart & Co., Inc.; Salomon Bros. &
Hutzler; Harris, Hall & Co. (Inc.); Harriman Ripley &
a
statement
authority to sell $50,000,000 unsecured debentures
through competitive bidding.
Probable bidders: Morgan
Stanley & Co.; Halsey, Stuart & Co. Inc.; The First Bos¬
Oct,
For construction
Public Service Electric & Gas Co. ( 11/22)
r
for
Central Maine Power Co.
Underwriter—Bour-
shares.
j-
Board
publicly. Coffin & Burr,
Inc., of Boston, Mass., is listed as underwriter. Proceeds
will be used to reduce outstanding bank loans incurred
to pay for new .construction,
Proceeds—For construction
Angeles.
">
stock.
! U
(10/18-22)
Co., Inc.
scribed shares then will be sold
Sept. 22 (letter of notification) 25,000 shares of 60-cent
cumulative preferred stock, series A ($10 par) and 100,000 shares (850 par) common stock, issuable upon con¬
version of the preferred stock. Preferred will be offered
at $12 per share.
Each preferred share is to be con¬
vertible
Edison
57,000 shares ($2 par) common stock, of
are
being offered by-the company and
Oct. 13 company asked the SEC for authority to sell
approximately 300,000 shares of common stock to net
approximately $5,000,000.
Stock will first be offered to
present holders of preferred and common stock. Unsub¬
Union Plaster Co., Los Angeles, Calif.
«
Potomac
Oct. 11 reported company contemplates sale before year's
end of $5,500,000 bonds and 30,000 shares of preferred
•
;
Power & Light Co.
reported company plans the sale late in Novem¬
ber of
Mfg. Co., Detroit, Mich.
Prospective Offerings
•
July 30 filed 80,000 shares (no par) common stock. Un¬
derwriters—Union Securities Corp. and W. C. Langley &
Co.
Price by amendment.
Indefinitely postponed.
at
.
istration
C.
Wilmington, N.
(E. S.)
opening a
Westerly, R. I.
Co.,
shares
stock of the company, acquired in set¬
Sept. 24 company announced that it will
Sept. 17 (letter of notification) 94,000 shares (250 par)
capital stock.
Price—$1 per share. Underwriter—Ster¬
ling, Grace & Co.
To move the plant and purchase
additional machinery.
Tide
common
Probable bidders: Halsey, Stuart & Co. Inc. (bonds
only); W. C. Langley & Co. arid The First Boston Corp.
(jointly); Hariman Ripley & Co., Blyth & Co., Inc., and
•
Union Securities Corp. (jointly on stock); Shields & Co.;
45,000 by three stockholders.
Underwriter — Suplee,•
Equitable Securities Corp.; Lehman Brothers; Kidder,
Yeatman & Co., Inc., Philadelphia.
Price—$7.62V2 each.
Peabody & Co. and Alex. Brown & Son (jointly).
Proceeds—From company's offering will be used to pay
Youse
Sept. 27 filed
which 12,000
4
Standard Cable Corp.,
Fiber Tile
,
Baker, Simonds & Co.
Proceeds — To replace part of
working capital for past expenses.
Squankum Feed Supply Co., Inc., Farmingdale,
New
(10/19)
secretary of the Treasury Department at
Washington and will be opened at 10 a.m. (EST) Oct. 19.
The Treasury wants to sell this stock in one block and
will not consider any offers covering less than the total
13,676 shares.
Sept. 15 filed 100,000 shares ($1 par) common stock, of
which 20;000 will be soid by company and 80,000 by four
stockholders.
Price — $5 per share.
Underwriter —
Aug. 24 filed 22,000 shares of $2.60 cumulative (no par)
preferred stock.
Underwriters — Paine, Webber, Jack¬
son & Curtis; Stone & Webster Securities Corp.; Rauscher, Pierce & Co.
Price by amendment. Proceeds—
To pay, in part, bank loans used for construction pur¬
poses.
Indefinite.
Aug.
yv;.'-, //,/.
fiscal, assistant
6
modulation radio station. to be located
Memphis; and for construction of television station.
Telephone Co.
Associated
as
tlement of loans made to the road under the Transporta¬
frequency
plant and for other corporate purposes.
Southwestern
(no par)
:
,
Broadcasting Co., Memphis, Tenn;
(letter of notification) 6,000 shares of Class "A"
common
voting stock ($2 par); and 100,000 shares of
class "B" common voting stock
($2 par). No under¬
writer. To finance the construction and operation of a
Oct. 7 (letter of
new
Minneapolis & St. Louis Ry.
The U. S. Treasury Department will sell 13,676
WMFI
Oct.
working capital and general corporate purposes.
Southern
& Co.
•
V<
Co., Pittsburgh
(Edwin L.)
underwriters.
ston
•
Sept. 28 filed 200,000 shares (no par) common stock.
tion Act of 1920. The Treasury would keep all dividends
Underwriter—Hemphill, Noyes & Co., New York.
Price,
P9id to date, includin'g a dividend of 25 cents a share
by amendment.
Proceeds-r-Will go to selling stockhold- %
payable Oct, 15 to holders of Record Oct. 11.
ers.
Offering indefinitely postponed.
Offers to purchase, the stock will be received by tHe
of;which 1,350,000 shares will be sold by company and
150,000 shares by W. G. Nelson Exploration Co. Under¬
writer—J. J. Le Done Co., New York.
Proceeds—For
•
underwriter. For working capital.
share. No
>•;
1,500,000 snares of common stock
8 filed
Co.* Lincoln, Neb.
shares ($100 par)
per share and 112
($100 par) preferred stock, to be sold at $40 per
(letter of notification) 190.4
stock, to be sold at $23.55
4
common
per
company's construction program.
Michigan Bakeries, Inc., Detroit
11 reported company plans public offering of 67,500;
shares of 5V2% cumulative convertible preferred stock
(par $20), with First of Michigan Corp. and S. R. Living¬
Oct.
Western Good Roads Service
.
Oct.
share.
Under¬
writers—Boettcher & Co., Bosworth, Sullivan & Co.,
Denver, Colo., and Hutchinson & Co., Pueblo, Colo. For
common
•
ing the stock on the New York Stock Exchange without,
underwriting.
..r
•
(Continued from page 41)
.
•
CHRONICLE P
FINANCIAL
&
COMMERCIAL
THE
(1574)
selling
shares of
company-
explains that the current revision
is due to market conditions which
it believes we^yqnts the cut in the
block to be sold. "
t
;
Volume
168
Number 4742
THE
COMMERCIAL
Business—Today and Tomoirow
(Continued from page 39)
apparently "cannot take it."
seek
Next
They
to maintain prices instead of
volume
of
production, to
high profit margins through
duction
since
cutbacks.
it finds
it
to
cut
dustries
duction, seeks to have government
can't
dispose of the surplus regardless
of whether prices
and
scale
of
soundly adjusted.
Of course, re¬
adjustments of relative volumes in
the different branches of industry
must be made as we come to the
end
the
of
But if
a
ment
reconversion
period.
general restriction
is' continued
for
siderable time, it would start pro¬
gressive disemployment in which
impairs
other
some
^company's
market till all become involved in
spreading recession.
-
It should
be a cause of reassur¬
that this process of
catching-
ance
and
of
how
to
chronic stagna¬
or
be
the
avoided.
Here I shall conclude
on
of optimism as to
ing forward for
able basic conditions
into
sustained structure of
activity and
time within
some
tion.
Since
reasonable
that that
assurance
situation
will
several
have
we
strong general
maintained for
income.
build these favor¬
That
would
been
well-
a
life
attached
and
to
laws,
be
in
dare
and
postwar
boom.
leadership
of
'How
ot
this road down which
people
gaily
driven by government's
struments of power'."
Declaring
our
that
"we
that
stop
'Let's
Pre¬
and
adopted
in¬
un¬
of
the
J
,
repeal,
Federal
Govern
Z,
their
or even
is
no
wonderful
the
or
and
doubt
to
reason
genuineness
any
continu¬
we are bound
tions
and
rigidities
imposed
by
this government will make it
powers," Mr. Mullendore
to emphasize that "the
implementation of these laws and
nniirnitpH
see
we
fellow-citizens
our
all-powerful
government, and that the restric¬
on
rnpnt
assure
inflation, that
by the chains of an
ex¬
limited
policies
managers
Have
gerous
lost
government of
a
business?'
of this prosperity?
Do we
have any right to pretend not to
see that which alt of us must
see,
that we are in the midst of a dan¬
government of limited powers
went
business
ance
and
have
business world
question above all, viz.:
we
the
so
'new
the
business
that
the
today
traveling,' impelled
are
is
right to
to
American
policies
which
concentrate
in the Federal Government,
ceedingly difficult to restore the
impaired elements of the Ameri-
-
£
can free market, and hence the
\ American production system when
mod-
serious
thi
Q
even¬
ahead,
ground
to
hope
that
great peoples of the
complete this rolling adjustment dependable basis. You could then
from similar causes.
of the whole economy from war be doing a
straight engineering
of
game
of
and
upon one
America
the
years
leaders
to suggest that it is
that
the
responsible
time
end
measures
and
I
years of
experimenta¬
political
war
We
a voice.
Our fellow-cit¬
izens may not be interested in our
rationalize hopes based
on
wishful thinking
and
began
realistically to look ahead to the
power
flation, to collectivism,
the
political views but they are inter¬
ested in the opinion of business
of
ifieation have been, are
being, and
tually to widespread human suf¬ will be
fought by the people themequipment market and the
there
is
fering such as already has befallen
labor market on an orderly and
selves—by those blocs of voters
we
may
other
be
playing
as¬
gen¬
do have
bease
insurance
that |
and which will lead to further in¬
mean
the traction industry would;
the materials market and!
you of
can
business
long-run possi¬
"We
of
the
business
group,"
bilities as well as (what I said
Mr. Mullendore
declared, "while
earlier) immediate prospects.
If sporadically
protesting inflation¬
in fact as I still hope, we do "con¬
ary fiscal policies, big government,
tain" the inflationary push which
high taxes and restrictive laws,
grew
out of wartime financing
have seemed to say that we are
and postwar domestic and inter¬
nevertheless prosperous, and
in
national strains, business states¬
the majority, we now seem to
manship and labor statesmanship
acquiesce in the false labels of
and farm statesmanship have it in
'progress' and 'reform' which have
their power to
generally strong market situa¬
1,000
precious
We
Yet
executives who composed his im¬
mediate audience.
note
a
nearly
most
erations yet to come.
our
tend.'
high
collapse
the
say:
socialistic
prepare
are
of
to
apathetic
of
thetic Trusteeship." and quite ob¬
of high-level prosperity, viously he was
addressing his re¬
for depression if pe¬ marks to a much wider
group than
program
trustees of
sets
this
being
and
tion,
was
cease
demand for the realistic
appraisal
The title of Mr.
address
can
children
"Apa¬
up and of adjustment of prices,
inventories
and; production
in
many separate lines has been go¬
a
Oct. 6.
on
Mullendore's
Mullendore had
of the forces which have been
thus
built up through these
is a American Life
Convention, in ses¬
activity sion at Chicago's Edgewater Beach
Hotel
can
enjoying the intoxication of infla¬
tion, there should be little popular
You
market
much
to the obvious ques¬
we do about it,"
answer
Mr.
years,
pointing out that:" "It is
small wonder that, from a people
Your
of
currency."
In
tion, "What
"We
opening paragraph of an ad¬
by William C. Mullendore,
dress
43
chase of government bonds which
underwrites the continuance of in¬
flation, and of managed
(Continued from first page)
President, Southern California
busi¬ Edison Company, Los Angeles, at
possible effort the 43rd annual meeting of the
any
own.
(1575)
Scores Business (or Failure to
Combat "Unlimited" Goverment
the
other industries generate.
But at
the same time you as well as all
the others must follow a forward
\
CHRONICLE
materially affect the
.
your
not
FINANCIAL
Finally
yourselves.
tempo by
tion
con¬
each company's effort to
protect
itself by curtailment of operations
ness
riodic
move¬
any
processors
generally.
like
derivative
are
food
the service trades and com¬
munication and transportation in¬
pro¬
production^ in the several lines
goods,
distributors
come
pro¬
Agriculture,
hard
soft
protect
light) manufacturers,
come
&
•
inflation has
it« dan
run
ge^us course?
ge™us course:,
,
- • '':
We lea^y believe that Soclallsm 13 inevitable and that we
must become reconciled to it, then
"Since V-J Day in particular, new governmental regime.
disturbance and postwar inflation and managerial job, not
Labor, i sboiildn t we say so, and do our
trying to
we have
been living in a Fool's in the
to
one
of
stabilized
majority, believes it has a Pard toward helping to learn how
prosperity "play" these markets as in-andout speculators.
interest
without
in
Although increasingly vested
the drastic
You would at the Paradise.
and
cumu¬
maintaining
adaPt and modify our American
latively destructive readjustments same time be reducing the hazards threatened, internally and extern¬ Federal control over employment *d®as to the requirements of life
of other managements and
of a real depression.
And if we
helping ally, by a foreign power, and al¬ employees and employers. Farm- .in a Socialist State?
Here
there
cation
Yours is
is
the
to
particular appli¬
industry.
traction
business in which you
a
required to
public even at
are
go
serving the
on
sacrifice
of
your
own
profit position.
This same
requirement of service is not im¬
posed
other industries.
They are permitted to retire from
activity if they.find this course
to
on
many
their
individual
if
even
in
advantage
doing
so
they
bring
harm to the economy as a whole.
They are prone to say that self-
preservation
is
the
first
nature, and they cannot
law
of
the
serve
world
ers, in the majority, believe
they
have a vested interest in main¬
them
to
at full
tive
spirals
sions.*
that
lead
to
depres¬ completely in the tentacles
Government.
Ignoring or
\.
and
of
and
bus
street
efficiency
resources
their
not through withhold¬
works
the
do
as
which
This
use.
which
under
have
if
to
are
production
not
transit
subjected
industry
industries
classified
a
as
public interest
have
a
maximum
This
economy.
to
does
they need to be
public utility regu¬
that that could
or
rule
that
mean
lation
the
But all industries
clothed with
we
is
other
been
public utilities.
are
sys¬
comes through shifting
to the lines preferred by
the market,
ing
profit-and-loss
be done
dependable
the
destructive
fare
and
science
methods
perfect
of
war¬
of
methods
engineering in solving
problem of mutual adjust¬
their
or
in
as
this
aids to
Lead
to
Be
Taken
veterans.
been
of
overtaken
living.
fluous
that
I
In
this
dustry
though
process
the
traction
cannot
take
the
it should follow
in¬
lead—
in
the
procession and keep in step.
The
lead must be tak&n in- the basic
industries
like
coal,
steel
and
whole, have rapidly
processors
panies
Then
come
the
like the chemical
and
metal
great
com¬
fabricators.
government
guarantee
loans for construction, to
hoped-for
present
earnings,
loans
ment
and
government
future
our
.
by
govern¬
subsidies
policies
and
which
high prices and high
wage
by
force
scales.
most
SITUATIONS WANTED
am
it is
sure
super¬
cial
or
guaranteed
means
and
economic
government
government
years.
controlled
economy under a
of unlimited powers.
government
of
freedom
that
Finally, all of
we
have
a
vested
maintenance
government
have
our
a
of
us
very
ourselves.
As
difficult to extricate
in
the
case
the
price
both
as
geographical
to time
and
as nesses
and undermine
the selfBut discipline upon which freedom de¬
sup¬ pends.
Government subsidies for
dispersion.
long-range
a
port factor.
individuals,
Now I have dealt in
with
ion
or
each
the
of
groups and
important
rapidly ripen
interests,
the
at¬
fash¬ segments of business
vested
questions into
some
I tempted
removal
of
which
firm answers jeopardize the life of
categorical predictions.
But I cratic government—a
trust that you agree with
this is the
only sound
of
in his
us
individual
post
responsibility is to be
that
fast-changing
business
world
fact
a
he
deal
with
the
Mr. Mullendore went on
to
item by item, the various
list,
ways by
which Federal powers
have been
complexities of a
of private enter¬ consolidated
frame of
lytical method, not
inside
tips,
patterned
remarks
searching
ana¬
ability of
during
the
past
15
side,
it is not
a
reasoned faith in the
business
analogies.
to
attitude, but
the basis of
hunches
on
personal
lean
teletype, plugboard,
handle
that
or
the
mere
While
my
an
increasingly literate
public to make private
enterprise
under
representative
government
optimistic
and
Polly anna
tem.
more
*
'
a
more
abundantly
steadily productive sys¬
own
available
pur-
counter
for
cage
work,
correspondence,
small
house.
over-the-
Particularly
adapted for one-girl office. Box
B 929, Commercial &
Financial
NOTICES
Chronicle, 25 Park Place, New
York 8.
CAN
COMPANY
COMMON STOCK
On
October
5,
1948
a
'
quarterly
dividend
of
seventy-five cents
per share was declared on the
Common Stock of this
Company, payable No¬
vember 15, 1948 to
Stockholders of record at
|
the
close of business October
21, 1948. Transfer bookswill remain open.
Checks will be mailed.
NOW
I
AVAILABLE
j
Married Veteran-—Former Major—
!
Economics, specializing in Banking
EDMUND HOFFMAN,
Secretary.
which
prise and democratic government
within
of
we
demo¬
me
Street experi¬
acting in capa¬
principal's
assistant,
of
AMERICAN
will
any
former
members
that many
of
the
way
to French Government will substan¬
The important thing for tiate."
proceed.
city
of the
portation
Wall
ence; capable of
interest in
bonds, and hence
be
certainly it is
Secretary
Thorough
realize
vested
DIVIDEND
management.
govern¬
year
year
the
property
of Missouri River
pre¬
References. ::
Box 1 S-23,
Commercial and Financial Chron¬
icle, 25 Park Place, New York, 8.
security
perity'
most
to
west
ferred.
guardianship
guardianship
wards
as
lose
to say individual who gets into debt by
population living beyond his means, it is
of
and
Town
by
surely even though with de¬
ceiving slowness in
the
early
that
we
near future much
easier to embrace than to
studied ;by trans¬ escape from these political meas¬
agencies with the ut¬ ures which cater to human weak¬
care
ance,
gathering
pattern
must
general banking as lifetime career.
Experienced in real estate, insur¬
security of
security,' either not knowing
not caring
that government-
growth in recent and
years
Married
uate,
with
family, is for the
thoroughly sold on 'so¬
part
ment
a
want
estab¬
fellow
citizen, vitally in¬
means
upon
we
its
our
veteran, 29, college grad¬
desires banking connection
possibility of acquiring in¬
terest
in
future.
Compensation
secondary to opportunity to learn
say
The failure of business
spokesmen
of
further
lulling
of
consistently to warn against the
false and temporary nature of the
forces contributing to this
'pros¬
has encouraged
reliance
false values and the growth
to
by
BANKERS ATTENTION!!!
viously is in part sustained by
spending, pledging and re-pledg¬
the
regime, do
a
continue
noth-
terested in the future
in
Socialist
citizens into a false
confidence
here at this late hour?"
Many lines
subsidies to
himself and his
ing
the
are powerful vested
rate of business activity which ob¬
"In
,
petroleum.
con¬
in
are
lishment
j
by the high cost it will be
this
in
the
concerned
Industries
to
gov¬
hence
High industrial
interest in
amiability and com¬
contributed to family placence and negligence, we have practice of Federal Reserve
formation, but have now probably slipped into a position from which
of executive
by Basic
and
wages
each
ment.
protect. There
high
"Professor" Hecker put to me.
renounce
to
believe
not willing to see
children condemned to
living
j interests in government lending
people,
have not given you
must
aids
not
parities,
under such
agencies,
other
oyer agriculture.
production, the American 'and
a
price
of
do
State, and
increased
their
scale
of
living, mg of grants-in-aid and the enorprovided That is, we have seemed to accept j mous direct construction projects
and to some extent the cost basis as a sound basis for future plan- °f the Federal Government. Then
the individual
on which they could be provided. ning, an artificially-induced
these
industries
trols
creased
cilities would need to be
it does mean that
both management and workers in
But
.
our
lending
crop
multitude
of business also
have
can
You
revenues.
subsidies,
and
the
ernment
Big
also gauge the scale on which fa¬
without impairment of their effi¬
ciency.
and
and
travel
car
bankrupting
a
farm
in
are
period is the previously
unmeasured vigor or breadth of
tem.
the buying market provided by a
In simplest terms the process of
well-paid
and
fully
employed
economic
adjustment
for
sus¬
One other factor
that
tained high production demands people.
that suppliers continue to proffer makes for confidence in your fu¬
their service to the market and ture planning is the strong push
given
to
population
accept its verdict rather than try¬ recently
ing to force a settlement to their growth, partly from a marriage
rate accelerated by the war and
own
liking through
refusal
to
serve the market.
Real economic partly from the postwar financial
talism
of
taining
mini¬
fact mizing the fact that inflation is
realized, you as traction men can the most important source of postfull
feel reassured as to a good volume war
employment
and
in-
;_
conditions
these
If
That price level will quite cer¬
them¬
selves.
But it is equally true that tainly be much above prewar and
they can needlessly bankrupt each presumably somewhat below
rather than above the present.
other by
refusing to share the
One thing that we have learned
common burdens of venture capi¬ ;
by
economy
.
.
who believe they have vested interests in the maintenance of this
stabilize their operations though suffering from the worst
production and thereby add inflation in our history, we have
to the certainty of your own out¬ been
living as though we were
look,
This is a constructive spiral truly prosperous, while each day
and should displace the destruc¬ we have become entangled more
I
■
v
Age 44, college graduate. B. S.
The Board of Directors of
Wentworth
Manufacturing
Company
has
declared
twelve
and
a
one
dividend
-
half
of
cents
(121/20) per share on the out¬
standing common stock of the
Company, payable on Novem¬
ber 22, 1948, to stockholders
of record at the close of busi¬
November 1, 1948.
Checks will be mailed.
ness
JOHN E. McDERMOTT,
Secretary.
in
j
and
|
Salesman, contactman, officer of
Brokerage.
Former
Trader,
2
| substantial financial firms. Wishes
S
to
make
with
contact
Financial
"
firm,
bank
or
finance
company.
I Present firm discontinuing. Ex¬
cellent
|
i
L
record
T-108,
The
and references.
Commercial
&
Box
Finan-
cial Chronicle, 25 Park Place, New
York 8, N. Y.
/;
)
•
",
..
„
.
J
44
Thursday, October 14, 1948
CHRONICLE
COMMERCIAL & FINANCIAL
THE
(1576)
will not be for another
BUSINESS BUZZ
officials
of
monetary
legal
-required
from the Nation's
STOCKS
WASHINGTON,
C. — Behind the scheduled Court and
hearings
into
the Transamerica case,
D.
in
,
Board
Reserve
13
an
cretion
was
on
Board,
Reserve
Federal
the
speci¬
its charges or
argue
the first round when it forced
of
"■':v •'' *v;
;
fast
■
quiet until it had ren¬
dered a decision. Section 7 of the
Clayton Act, the statute under
which the Board is attempting to
operate against Transamerica,
does not require secret proceed¬
ings. It only relates to lessening
competition, etc. The basis for
.keeping the proceedings secret
Administrative
Pro¬
cedures Act of a couple of years
the
Under this act administrative
•hearings involving "sensitive
areas
of the economy," like the
ago.
position of banks and insurance
companies, may be, but are not
required to be, held in private so
if charges are not substantiated,
harm
which
otherwise
would
publicity,
can
be
the
on
How
secrecy.
Board
serve
other
an
end of
Federal Re¬
called for
That the
hand,
the
gunning
was
for
Transamerica has been a matter
of record for some time,
spilled
hy Chairman Tobey of the Sen¬
ate
Banking
Committee
last
Ml
spring. The company asked that
the whole complaint be
opened
to public scrutiny. It believes
more harm can come from
up
that
the
an
stories than from
inspired
open
incidentally,
it
america believes
H:
*
Prior to the
Transamerica
Board
charged with making policy for
mobilizing the nation's produc¬
on
to the front
McCabe of the
good
progress
toward
an
agreement on bank holding com¬
ing-
has
legislation.
McCabe
Gov.
interviewing all shades
been
opinion on the precise
authority which the Federal Re¬
serve Board should exercise,
ex¬
of banking
plicitly in the way of supervising
the
activities
of
bank holding
is
There
companies.
that the terms of
a
a
prospect
proposed bill
for consideration of Congress
be
of
before
written
will
convening
the
Congress in January.
81st
the
support which the American
Bankers
Association
gave
this
The
move
at
its
convention late
agreement on legisla¬
of
tion.
of
*
>■?
A
m
upset
agreement
seen.
i
will
In
Transamerica
the
Whether
case
the
this
prospect
remains to be
legislation
House,
proposed this .year, by the- Re¬
-<m
out
,
Hi
:J:
H:
nancing. It has a tentative plan,
to be used as a stop-gap in case
unexpectedly
came.
The
of that tentative plan,
war
details
entirely
secret.
Next month NSRB will work
out a list of projects for the
Federal Reserve, Treasury, and
however,
are
study, to help
other agencies to
it
devise
finished
more
a
war
wonder privately
sources
Washington, incidentally, is not
nearly as hard by the war
Washington will make a respon¬
sible, quotable prediction that the
avoidance
of
war
for
several
likely, without various
months is
qualifications.
It is
recognized
that only the Russians can answer
that question positively.
Washing¬
United
disposed to pre¬
On the other hand,
that
knows
ton
States
not
is
cipitate
a
the
Dean
at the
businessmen
that -they
must
crimp
their
planning for more than a few
f
is
practically
war.
of
because
the
hedge
no
The controls neces¬
bludgeon
the nation
from its present high level of
civilian activity toward an allout war economy would be so
there
that
sweeping
is,
prac¬
speaking, no hedge
against war. About all a busi¬
nessman can do, it is suggested,
tically
be
no
and
war,
hope
would
one
be
swept
control
war
of
away
into
of
govern¬
his
business
flood
gigantic
mental
if
all
came.
Hi
Second
,
class
mail
Hi
users
prob¬
postal rates
and fees
to
only about half the en-
up
larger postal deficit. The word
al¬
ready has been spread that Con¬
Finishing
Dorset Fabrics
Lonsdale Co.
Seatex Oil
Soya Corp.
bill
housing
the
!-
M. S. WlEN & Co.
ESTABLISHED
4%, could be raised to 4%% with
the
In the face of a large decline
in
interest
the
guarantees,
!
Administration
Veterans'
1919
Members N. Y. Security Dealers Ass'n
permission of the Treasury.
40
Exchange PI., N. Y. 5
HA. 2-8780
Teletype N. Y. 1-1397
rate
probably will not be raised. The
politics
that it would be a
are
greater liability to raise the cost
of borrowing
than to restore
loans. The eco¬
the flood of VA
nomics
the
drop
guarantees,
VA
in
of
regardless
that
are
ceptable house seems to be get¬
postal employees. Congress raised
make
of
part
everybody who can build an ac¬
H:
~
ably will get it in the neck next
year. Near the end of the session
of Congress, a big raise was voted
various
As
passed by Congress during the
special summer session, it was
provided that the interest rate on
Gl-guaranteed home loans, now
he has
to what
might''best do with his
money, his materials,
his fac¬
tory, or his production schedule
luck. Any little guess as
Co., 632 South
November takes office.
there would
is to plan as though
clamor
the
&
Street.
U. S.
to
sary
Witter
CALIF.—Fran¬
joined the staff
Belle Isle Corp.
of institu¬
tional lenders for a higher GI
home loan insurance rate, a boost
in the rate is not expected before
the election, and perhaps not be¬
fore the Administration elected in
Despite
Chronicle)
Financial
South Jersey Gas
so many
ahead
months
gress next winter will consider a
postal rate boost. While various
mail users may find their rates
the surest chance of getting hit.
he
mobilization plan.
finance
of
boosted, second class mail stands
In this connection, some
against
of war fi¬
plan
finished
a
he
ting all the mortgage money
needs.
"
Actually,
Hi
Hi
the
;
whole
Administration
or
Oregon Portland Cement
Riverside Cement A & B
Spokane Portland Cement
monetary
static until well after the election,
until
Ralston Steel Car
-' Hi
picture so far as the government
can affect it, is
likely to remain
perhaps
Trading Markets:
after
takes
the
new
office.
LERNER & CO.
Investment Securities
10 Post Office
Square, Boston 9, Mass.
Telephone Hubbard 1990
Teletype BS 69
It
All the guesses
likewise
war.
here are that the Reds
are
disposed to avoid any action
would cause the U.
S.
Teletype—NY 1-971
HAnover 2-0050
which
western
and
into
an
United
war
and
Hence
Reds
the
Firm
is
not
in
a
Trading Markets
war.
know
that
FOREIGN SECURITIES
Hill, Thompson & Co., Inc.
All Issues
States wants to avoid
they
the
may
Markets and Situations for Dealers
position to
be expected
about as
hard
what's
as
fight.
ahead
for
to
,
they can
the
SPECIALISTS
50 Broad Street
,
im¬
.continuation
120 Broadway, New
FOREIGN SECURITIES
=
mediate ^future is a
r.ABl MARKS & TP- INC.
around
world
western
short of starting a
So
plunge
to
powerfully for some time.
strike
just
Europe
all out military
However,
the
kick
.
constant
the
and
uncertainty
there
came
war
the Board would be with¬
soon,
last
month, was accelerating the pos¬
sibility
of
threat of war.t
larly the financial community of
New York. No leading official in
Federal Reserve Board was mak¬
pany
if
The
cis J. Mitchell has
Spring
prospect of war. In the present
state of the nation's economy,
as
to
LOS ANGELES,
Can went down!
Tuesday you told me it went up! Yesterday you said it went
down!
Will you please make up your mind!!"
planning
the
mobilization of men or machines.
business
jitters as so much of the rest of
the country seems to be, particu¬
spilling out of the
case
£;
Street.
"Monday you told me Consolidated Garbage
feeling of
its
staff
Co., 453 South Spring
*3*
tion, manpower, and all other re¬
sources for the eventuality of war.
It considers mobilizing
the na¬
tion's finance as much a part of
hit
Si:
Chairman
pages,
Resources
the study. The
is the top civilian agency
Board will sponsor
Trans-win its
the courts.
with
and
Security
National
opinion
can
public
with
both
case
Aaeiu
financed
be
can
war
a
full
hearing.
And,
of Fewel &
Joins Dean Witter Co. 1
production, full em¬
ployment,
and total income is
being spent on civilian pursuits,
is a subject which shortly will be¬
gin to receive serious study. The
avoided.
on
Collins has been added to the
(Special
when
Chronicle)
Financial
The
❖
Hi
Nevertheless,
Transamerica,
to
LOS ANGELES, CALIF.—W, E.
j
have available.
Hi
i
\
Fewel & Co. Adds
will spend this year all
the money they
Los An¬
Stock Exchange.
"(Special
i
the Armed
that
premise
Services
question
through
geles
458 South Spring
Co.,
&
members of the
Street,
administrative
the law and
as
.
E. Whitten is now with Gross,
Rogers
practice allows them to. Much of
widely-predicted expectation
that the military will spend $17
billion the next fiscal year is based
Originally, the Federal Reserve
to keep the whole
-come
non
& Co.
Chronicle)
Financial
The
to
ANGELES, CALIF.—Ver¬
LOS
the
Board planned
was
(Special
schedule to place the orders as
on
why it should not, and this will
ctelay the Board's hearings which
•otherwise
would
have
begun
Tuesday. !
With Gross, Rogers
by the Military Establishment to
funds appropriated. At the same
time, however, officials will de¬
clare that they are moving right
The West Coast institution won
fications
has
which
years,
figures showing
relationship of orders placed
the
meek defense posture.
either to give more
re¬
1
*
the simplest
even
spectacular as Henry J.
Kaiser, Transamerica is not likely
as
fioard
■
is again lagging.
This suspicion is aroused by offi¬
cials who refuse to make public
be expected to assert them
with no little vigor. With parti¬
a
no
|
suspicion that mili¬
a
procurement,
several
may
to take
contracts were to
Cost plus but
industry!
lagged behind appropriations for
-expected to assert the advantages
of branch banking. The company
sans
is
There
tary
be
may
farmer
the
negotiation!
•
the
before
proceedings
price
Sleagall
to
*
0
the
90%
were
what cost plus
House.
would be ok'd by the
Transamerica, during the course
of
the
on
said
supports,
price
supports
that
to
the
controversy
substantial agreement
the terms of a new bill, it
a
arguing
Aiken,
of
behalf
>'jt
ilt
Hi
Senator
parties
reached
of branch banking
.
effect.
hold¬
principal
standing that if all the
public heard the pros and
argued.
lias the
cons
likely to be sought, no special
issues, or other change put into
companies, was shelved. It
shelved with the under¬
ing
legislation providing for fur¬
ther regulation of bank holding
■companies.
Not since* the Banking Act of
1935 was the subject of hearings,
on
regulate bank
to
necessary.
Treasury money
new
no
is
Board, giving it broad dis¬
serve
almost at the very
agreement is in sight
public—and
moment
in<«>-
to speak their piece
is
restriction
Likewise
a
years
position to say that further
a
credit
curious situation.
It is that the proponents of banking
-combinations will get the first chance they have had in more than
is
there
man¬
determine that commercial
loans are rising at a rate beyond
the seasonal demand, will they be
agers
'BONDS-
Federal
deposits.
monetary
the
until
Not
for both
reserves
and time
demand
And You
Capital ■ v
recently
measures
adopted—the rise in the 1-year
government rate, the rise in the
rediscount rate, and the boost in
on...
Behind-the-Scene Interpretations
month that
appraise the effects
can
"
Tel. REctor 2-2020
.r
New York 4, N. Y.
AFFILIATE: CARL MARKS & CO. Inc. CHICAGO
,
York 5
Tele. NY 1 -2660
I
@FedFRASER