Full text of Commercial and Financial Chronicle : October 27, 1949, Vol. 170, No. 4850, Section 1

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

|•

BUS. A&M

ESTABLISHED 1S39

£0-

In 2 Sections

LIBRARY

—

iw:»Al«*ttfr»4

Section 1

Reg. XJ. S. Pat. Office

Volume

170

Number 4850

Federal

New

York, N. Y., Thursday, October 27, 1949

Will Business

Monetary and

Credit Policies
Professor of Banking, Graduate

Dr.

School of Business,

~v....Columbia University

Beckhart, in discussion of gold, interest

ment

Cents

Copy

Recovery Continue?

By SUMNER H, SLICHTER*

By B. H. BECKHART*

Price 30

economy,

ce¬

policies of Federal Government, points ont these -policies;^

because U. S. dollar has become international
standard,

University Professor, Harvard University

affecting business trends, holds effect of sterling
if prices are lowered. v Holds coal and steel
strikes may retard but will not
prevent recovery. Foresees gradual drop in present rate of capital outlays on plants and housing, but contends rise in government expenditures and.
greater proportion of
personal income spent- for consumer goods will tend to sustain production and
employment during
i
next niaeawntbs.
Says "cold war" from narrow economic standpoint "is a good thing."

,?.*:~i;A^XY;-:
rate and debt manage-

Lament

Harvard economist, reviewing recent
developments
devaluation will be stimulating to American

■*

have

now

worldwide significance. Stresses need of
promoting confidence in?*
stability of dollar and advocates restoration of its gold converti¬
bility,, Attacks low interest rate policy, advocates abandonment of

Recovery from the recent mild recession in business began in the third quarter of 1949.
pegged rates. Holds constructive policy of debt management should V The usual drop of employment "between
July and September "was virtually absent "this
aim to reduce
floating debt, improve rate of debt maturities and
year.1 In September total employment was 900,000 below last
year; in July employment:
increase holdings of government bonds
had
been
1.9
by permanent investors.;
'

•

^million

The

topic of my talk "Federal Monetary and Credit Policies"
recently> formed'the subject matter oi a lengthy questionnaire sent

EDITORIAL

several, hundred persons by Senator Paul
Douglas, Chairman of a
Subcommittee of the Joint Committee on the Economic
Report. This
q u e s t i o n-<S>
naire

was

for

ment

the

suggestion

concerned

National

with

Commission

Congress

make

topics

such
as

appro

the

priate

guide posts of
monetary pol¬

icy,

the

ad¬

vantages

and

disadvantages
of flexible fis-

c a

the

policies,
most

sirable
of

ner

de¬

man¬
coor¬

dinating
B.

Beckhart

the

government's

monetary,
credit

fiscal

and

activities,

Questions of this type
and

broad

are so

etc.
basic

in character that they

afford in themselves strong arguaddress

Dr.

Beckhart

before the Illinois Bankers' Asso¬
ciation

Conference, University of
Illinois, Urbana, 111., Oct. 21, 1949.

reappraisal

requires
comprehensive
and objective study by a
non-par¬

Commission, there

are

cer¬

tain phases which I should like to

single
tion.

for

out

special

considera¬

particular, I should like
discuss the gold, interest rate

and

debt management policies of

the

Federal

evaluating policies in these
three fields, one needs to bear in
mind that the dollar

serves as

currency

the

and

is recognized as such
Articles of Agreement of

the International
In

Fact and Phantasy
We have

tion Commission

;

idea what spurred the Economic
to do such a thing, but we

Coopera¬
heartily con¬

gratulate* Wayne C. Taylor, Assistant to the Administrator
of that
organization, upon his analysis of certain aspects of
our
foreign policy for decades past which bear directly upon
the possible success of the
organization for which he works.
Mr. Taylor's
story is, of course, familiar enough in broad
outline, at least to the matriculate, but either is not known

4.1

less

than

Bought

Sold

•

Monetary Fund.

consequence, the policies which

adopted in the fields of gold,
money rates, and debt manage¬

must, of necessity,
towards

making

be di¬

the

dol¬

possible type of in-

(Continued

Here

United States

essence.

Between

1914

and

page

1949

u c

t i

ber

enjoyed what is commonly termed a favorable
amounting to some $101 billion. Now, how

balance of trade

these

were

accounts

settled?

Government

"loans". and

Funds,

was

Boston

Exchange

Street, New York 5

Chicago Philadelphia Providence
London

Amsterdam

5.5%
Prof. S. H. Slichter

above

July,

New

hous¬

ing starts in September

were

100,-

page 42)

*An address by Prof. Slichter
before the National Conference of
Commercial Receivable Compa¬

nies,

Inc.,

New

York

City,

Oct.

were,

and for the most part still
(Continued

28)

are,

page

of which about $49
the other $19 billion
listed as "loans," al-

34)

State and

550 Branches

inc.

Municipal

Canada

across

Bonds

Monthly Commercial Letter
upon request

THE

White,Weld&Co.
40 Wall

in
m-

Government, came to some $68 billion,
billion took the form of
outright grants,

COMMON STOCK FUND

Members New York Slock

grants, that is so-called loans and gifts by the United States 25,1949.

A Mutual Fund

on request

proo n

the

PREFERRED STOCK FUND

Prospectus available

I nT

dustrial

politicians or presumably to the rank and file, or else 000, up nearly 22% above Sep¬
tember, 1948, and total contract
is ignored by them. We take his
figures as he presents them, awards in September were above
since we are sure without verification that
they are sub¬ a billion dollars—the highest for
stantially correct as stated, and permit Mr. Taylor to tell any month since the war and no<
less than 43.5% above
his own story. -:V. V
September,
/,
1948. The sensational increases in
Straight Story
\
(Continued on

Franklin Custodian

Quoted

•

3.4

million.

Company, Inc.
Common Stock

July,
had
dropped over
700,000 to

to the

are

lar the best

almost

;

international
the

Government.

world

We
See It

which

been

million

which

tisan

detailed

While the whole topic in all of
its
many
complexities is
one

ment,

Camp Sea Food

the

had

monetary policies.; '

rected

Van

ment,

Credit

and

established

studies necessary for a
of American

*An

Monetary

that

below

last year; Un-

•

BOND FUND

INCOME (BALANCED) FUND
Prospectus

OF NEW YORK

request

FRANKLIN
64 Wall

DISTRIBUTORS, Inc.
Street, New York 5

Dept. Teletype: NY 1-708

THE CHASE

OF COMMERCE

Ilcad Office: Toronto

Bond

Bond Department

;

CANADIAN BANK

THE NATIONAL CITY BANK

UTILITIES FUND

Netv York

Agency: 20 Exchange Pl.

Seattle Portland, Ore.

NATIONAL BANK
OF

THE

CITY OF

NEW YORK

San I'rancwco Loe Angeles

NATIONAL BANK
LAMB0RN & CO., Inc.

of INDIA. L'MITED
Bankers
,t

the

Government

Head Office: 26, Bishopsgate,
London, E C.
'

Branches In India,

Zanzibar

Subscribed Capital.;

Paid-up
Reserve
The

Bank

Underwriters and
Distributors of

Capital_

£2,000,000

undertaken

—

Refined

—

Established

Liquid

DoHi?noN Securities
Grporatiot*

(Incorporated)

CLEVELAND
New York

Cincinnati

Chicago

Denver

Dallu

Columbus

Toledo

Buffalo

New Study

available

Exports—Imports—Futures

1899

England

Public Service Co.
A

OTIS & CO.

banking and exchange business

also

bonds & stocks

SUGAR
Raw

description of

Trusteeships and Executorships

NEW YORK 5, N. Y.

Corporate Securities

-£2,500,000

conducts every

New

CANADIAN

STREET

Municipal

£4,000,000

Fund.-.

WALL

and

Burma. Ceylon, Kenya

Ookray, Kericho, Kenya, and Aden
and

Kenya Colony and Uganda

■

Exchange Place, New York S, N. Y.

DIgby* 4*2727

Members New York Stock Exchange

111

other Principal

WHltebaO 4-8161

Exchanges

Broadway, N. Y. •

WOrth 4-6000

Teletype NY 1-702-3

request

IRA HAUPT & CO.
and

■

upon

Teletype NY 1-2708

Boston Telephone:

Enterprise 1828

MARKETS

TRADING

Railways

Commenting

Corporation
York 5

120 Broadway, New

Teletype NY 1-583

BArclay 7-5660

repeated in

future. Sees probability of drop in business activity before year's end, due to
industries and falling off in foreign trade. Holds government spending no1 guarantee
against business fluctuations.

near

decline in heavy

able

was

here

and

Federal
trial

u s

fr/[C pONNELL & Co.
Members

New

120

Stock Exchange

York

Exchange

Curb

BROADWAY, NEW YORK 5
Tel. REctor

1949.

2-7815

Roy L, Reierson

activity, but the effects are
likely to be of lasting signifi¬
unless

strikes

the

run

longer than seems generally ex¬
pected. However, it is evident
that business will have to assume

Black Star Coal

Corp.

the form of

Common

Kentucky Stone Co.
5

%V Preferred

in
pensions. The effects
increased " costs

devaluation will

of
the

appear" over

coming months, and in gen¬
will

eral

increase

serve

the

problems and difficulties of some
American

BANKERS BOND
>

Incorporated

Kentucky Home Life Bldg.
LOUISVILLE 2, KENTUCKY

let Floor,

Bell Tele. LS 186

Long Distance 238-9

businesses.

inter-

The

nationaL political

situation is like¬
ly to become of great importance
to

somewhat later,
when the time arrives to budget
our

economy

government spending for the next
fiscal

year.

1949

Business

Adjustment

Until the strikes began to have
on business statistics,

their effects

Allianceware, Inc.

there

some

was

decline

liquidation

BOUGHT

—

SOLD

QUOTED

been

not

recovery

WM. J. MERICKA & CO.
•

Incorporated
150

Broadway

Member
»

New York

Midwest

Stock

Union Commerce

Exchange

Building

CLEVELAND

Since 1932 Specialists in

VIRGINIA—WEST VIRGINIA
NORTH and SOUTH

CAROLINA

too

robust.

this

should hold, barring the

temporary impact of the
the 1949

year - re¬

adjustment will

strikes,
prove

the

half of

first

this

sequence

shows that in

past many of our business
fluctuations have
originated in

pol¬
of the large addi¬

similar changes in inventory

icy. In view
made

tions

business

inven¬

tories in the postwar years, some
correction
was
anticipated,
al¬

ventories
and

painless;
of

cause

relatively

was

sales

have

dropped

whole,

be¬

high

rate

unit

substantially,

prevented the adjustment from
becoming considerably more se¬
rious?

The
for

the

recent

provement?

im¬

what

other:

There

single explanation

to why the economy was

able

serious - letdown ear¬
lier
this
year.
Many
factors
helped sustain business activity.
The very caution
exercised by
to

escape

business

men

their

inventory

policies in the postwar years was
factor: unlike the situation in

one

of the shortest

lasting only about eight
months. Judged by most business
indices, it will also prove to have
been one of the least painful.
record,

prices, the reduction in the physi¬
cal quantity of goods purchased
by consumers appears quite small.
Perhaps the large
holdings of
liquid assets by the public, the
maintenance of personal income
at a high level, and the fact that
the declines ; in
production and
employment were not protracted,
all contributed in

the

some measure

relatively satisfactory record

of retail sales and consumer buy¬

ing.

The

nati, Ohio, Oct. 24, 1949.

reduction

business

Members

New

York

Stock

New

York

Curb

York

New

Commodity

Chicago'

Exchange1"

Exchange?

Cotton

Exchange

Exchange,

Board

Inc.

Trade*

New Orleans Cotton Exchange >;

AM- other

Exchanges

In addition, the economy' re¬
short-range support

from

the rising

ment

spendmg and the shift from

level of

govern¬

surplus to a deficit in Treasury
operations.
Underlying all these, and prob¬

N. Y. Cotton
NEW

Exchange Bldg.

YORK 4, N.

CHICAGO

DETROIT

PITTSBURGH

GENEVA, SWITZERLAND "

ably a factor of greater relative
importance than any of the others
mentioned in supporting the econ¬

this

earlier

omy

continued

year,

were

outlays for

large

able

demands

mulated

LAMB0RN & CO., Inc.
9 3

still

were

ample buying power'
was available to keep most heavy
industries operating at satisfac¬

tion

other

parts

SUGAR

the

Raw

—

seems

drastic

Liquid

DIgby 4-2727

country

/SJ51S15I5JB151SISfcil5J9JEIS]5J51SISI5JSI5I51B13

that recessions

indicate

adjustments

seldom

this

—

econ¬

to
of

fluctuations

ness

Refined

Exports—Imports—Futures

prevent a
downward
spiral
prices and
production. The record of busi¬
helped

and

omy

STREET^

IV AT, L

NEW YORK 5, N. Y.

strong, and

But

business are
protracted so

in¬

there

$35
INVESTED in

full

year',

subscription to the Monday
and

Thursday issues of the

"Chronicle"
ideas

will

galore and

give
pay

yon

liberal

dividends.

were

tangible bases for the better sen¬
timent, namely, a rise in incom¬

inventories

earlier in the year and

INVESTMENT

continued

high sales to the public.
seasonal
developments

Normal

the
necessity of restocking for the
holiday season in some lines also

SECURITIES

and

contributed to better business.

Public Utility

Trading Markets

Railroad

doubtless

raw

well

Municipal

—

stoppages in bituminous coal and
While it is difficult to appraise

the

request

ACALLYNandCOMPANY
zippin & company
208 South La Salle St., Chicago 4
Tele. RAndolph 6-4696

Tel. CG 451

Incorporated

II
NEW YORK

N. Y.

N. Q. B.
OVER-THE-COUNTER
INDUSTRIAL STOCK INDEX
10-Year Performance of

BOSTON

PORTLAND, ME.

OMAHA

PHILADELPHIA

KANSAS CITY

factors

WATERLOO

MILWAUKEE

importance of these
the recent upturn of

business,
ure.

35 Industrial Stocks

relative

them

CHICAGO

MINNEAPOLIS

New York 8,

REctor 2-9570

steei.

•

Issues

accumulation

against future labor
a policy which was
vindicated by the ultimate

difficulties

BOLIVIA

25 Park Place

materials, especially steel,

hedge

some

Commercial & Financial Chronicle

Fi¬

nally, with the threats of strikes
overhanging basic industry, there
was

Industrial

COLOMBIA

the

business buying

result of reduced

Telephone 3-9137

H. Hentz & Co.

ing orders. This, in turn, reflected

RICHMOND, VIRGINIA

New study

1856

ceived: some

the depletion of

Bell System Teletype: RH 83 & 84

All

Established

and

CRAIGIE&CO;

;

branch offices

our

large

F. W.

Firm

Ala.

Mobile, Ala.
Direct wires to

one

1919

NY 1-1557

HAnover 2-0700

New Orleans, La. - Birmingham,

spend¬

consumer

long as the heavy industries con¬
1920, we did not have tinue to operate at a satisfactory
speculative inventories fi¬ rate.
nanced through borrowed money.
Autumn Upturn in Business
Also,
we
have had
no • credit
In August 1949, the production
stringency: not only has the Fed¬
index ceased its downward move¬
Gross national product, for in¬
eral Reserve been careful to avoid
stance, has declined* only about the use of strenuous measures of ment and turned moderately up¬
ward. Prior to the strikes in coal
5% since reaching" a peak last
credit control, but in addition the
and steel, business sentiment had
year,
and for personal, income liquidity of the commercial bank¬
improved substantially.
In part,
and consumer spending, the drop ing
system, caution in lending
this may have reflected some feel¬
has been still smaller. Even the policy, and relatively large hold¬
ing of relief that the business de¬
ings
of
government
securities cline had not been accompanied
*An address by Mr. Reierson made it unnecessary to call loans
by the symptoms of real economic
before the Bankers Club, Cincin¬ or subject borrowers to pressure.

have been

Exchange

St, New York 4, N. Y.

has been quite modest, and
after adjusting for lower selling

tory

Sustaining Factors

Stock

York

New

25 Broad

ing

levels.
The
underlying
strength of this spending served
to cushion the decline in produc¬

Members

the

the
dur¬
goods such as automobiles,
to foresee the timing^of these de¬
farm
equipment, industrial and
velopments very far in advance.
business plant and equipment, and
Two questions are< significant
most major types of building ard
in this connection: One: what has construction. Deferred and accu¬
though it was admittedly difficult

Steiner,Rouse&Co.

commodities

some

total

smooth

While

buying.

consumer

retail

decline

the

continued

the

distress.

MUNICIPAL BONDS

{v.

times

activity

began in the latter part of
arrested, at least
temporarily. The upturn, while
fairly general and widespread,
has

this

The record

events.

evidence that the

economic

1948 had been

—

;

' ■ ;

1949. There is nothing ususual or

unexpected

which

Ohio

manufacT

largely a shift in the in¬
ventory policy of American busi¬
ness, from rapid accumulation in
the latter part of 1948 to some

reason

The

truly re¬

flected

strikes will have the most imme¬

substantially

not

does

half

first

the

ness

Common

and

contraction

summer

evidence seems quite clear
that the business decline durinjg

diate and direct impact on busi¬

American Air Filter Co.

for

allowances

The

turning

cance

some

turing operations.

upward. Of?
the three, the '

not

this
sta¬

flect

business

was

July,

vacations

was»

improving
and

Furthermore,

tistical

time' when

point

low

decline is due to inadequate

just' at

came

the

1948
de-

sentiment

York

velo p ments

Since 1917

and which is not a good

business in
the
country,
declined by only
17%
from the high
months in

by strikes.
These

our

of aggregate

measure

closed

were

New

production, which measures

economy

basic

portant

of indus¬

index

Reserve

most volatile segment of

the

home two im¬

Rights & Scrip

Bought—Sold—Quoted

The analysis of business prospects is probably more difficult and fraught with greater
uncertainty today than has been the case for a long time. Within the past few weeks, the
currencies of a large part of the world were devalued, the news was released that Russia
produce an
atomic bomb,

Specialists in

Louisiana Securities

1949 business adjustment, New York bank economist ascribes recent pre-strke upturn
pickup, but foresees little likelihood record level of postwar years will

in business to normal seasonal

PRICES

New York Hanseatic

Alabama &

By ROY I. REIERSON*
Vice-President, Bankers Trust Company, New York

Assistant

Arkansas Natural Gas "A"
AT NET

Thursday, October 27, 1949

The Outlook for Business

American Gas & Electric
United Light &

FINANCIAL CHRONICLE

COMMERCIAL

THE

(1650)

likely that all

contributed

some

well

meas¬

better

FLINT

(Continued

on page

32)

REQUEST

In the meantime, automobile

sales held up as

BOOKLET

National Quotation Bureau
Incorporated

46 Front Street

New York 4, N. Y.

Volume

170

Number 4850

THE

COMMERCIAL

FINANCIAL

CHRONICLE

(1651)

I N D EX
Articles and News

Devaluation, Currencies
—Walter E. Spahr

-Cover

Government, Business
Good—Edwin

•

and

Labor

Must

G. Nourse

for

Common

Spending

•

;*•

; ■-

Refunding

IB A

apparently,

measure¬

its

! The

with

its

prac¬

•

There

Dr. Walter

rela-

;;

the

"Chronicle,"

What Can

Traders Do

- •

is, in general, respect for

and Market

the Sales

Outlook—Anthony

Will

Point IV

—A.

Plan

Revive

Business

Man's

Book

ounce

world,

and

Washington

and

Published

The

...

FINANCIAL

REctor 2-9570

9576

SEIBERT, Editor

WILLIAM DANA
WILLIAM D.

& Publisher

SEIBERT, President.

market

state

corporation

and

Other

Chicago

city news,
Offices:

111.

news,

bank

quotation

clearings,

(Telephone:

Salle

State

St.,
0613);

C.,

■'

Union,

$35.00

Dominion
of
Canada,
Other Countries, $42.00

per

$38.00
per

per

Monthly
$25.00

per

Note—On
rate

extent

are

na¬

1920's,

following World
preciated

collapsing,

Stix:

currencies,
I, were de¬

depreciating rapidly,
being

country
that
or

509 OLIVE

would

show

that

the

metallic

But

Such'

employed

government

re¬

payments,
cannot

Com¬

and

Purposely Depreciated
Currency
in

Its

the

would be at
we

their
a

currencies

world

had

disadvantage unless
Apparently the

never

before

ernment

discount.

con¬

address

devalued too.

case, such as that provided

United

States,
had

seen

by the

set

which a gov¬
about purposely

new ISSUES

depreciate its currency and to
devalue it when it had ample gold

;

with which to redeem its

Spahr at promises to pay. 64th Anniversary
Program of the
A collection of slogans and unAmerican
Tariff
League,
New supportable assertions' were deYork City, Oct.
26, 1949.
(Continued on page 26)
by

per

Dr.

—

the

fluctuations

York

funds.

reach national market

•

,T Investors all
'

11 ,ooo

are

interested in offerings of

over

the

country

read The New York Times. ..in

communities in

states,

and

the

all

District

the

Columbia. That's
why financial
1

High Grade Public Utility and Industrial
PREFERRED STOCKS

advertising in The Times

covers

;the whole financial community
j

banking officials, corporation

executives, professional and insti¬

year.

Members St. Louis Stock
Exchange

utterly

devalued

STREET

ST.Louisi.moo

gain some advan¬
devalued
too
and

joined those other nations in their

Co.

supposed; or

misfortunes.

INVESTMENT SECURITIES

devalued,

of responsibil¬

no one

sense

tages

War

and

apparently
ity in this

misfortunes.

when

peo¬

by the

result

Bank, Ltd.

Glyn, Mills & Co.

will

sys¬

control

usually

Spencer Trask & Co.
Members New

York Stock .Exchange

25 Broad Street, New York

Members New

50 Congress

HAnover 2-4300

exchange, remittances for for¬
eign subscriptions and
advertisements must
be
New

instituting

common

account

amputations

the

Record
Monthly,
(Foreign postage extra.)
Earnings Record —*
Monthly,
year.
(Foreign postage extra.)
year.

made

year;

Publications

Ban!: and Quotation

$25.00

such
In

reserves

Eng¬

Subscription Rates
Subscriptions in United States, U.
Possessions, Territories and Members

the

international

'*An

second-class matter Febru¬
at the post office at New
under: the Act
of
March

Other

etc.).

135

1879.

1949

Every Thursday (general news
and ad¬
vertising issue) and every
Monday (com¬
plete statistical issue —
records,

ary 25,
1942,
York,
N,
Y„

Pan-American
„

RIGGS, Business Manager

Thursday, October 27,

com¬

Williams Deacon's

by William B. Dana

Company
Reentered

WILLIAM B. DANA
COMPANY, Publishers
25 Park Place, New
York 8, N. Y.

HERBERT D.

1949

CHRONICLE

Reg. U. S. Patent Office

sequence, gold and silver reserves
tend to flow out of a
country, that

Drapers' Gardens,
London,
land, c/o Edwards & Smith.

Associated Banks:

Up to the early 1930's, sensible
informed
people' regarded

except at

Says)

and

pel the people of another nation
to accept its irredeemable
promises

and

irredeem¬

they

good

' normal' manner.

since

Industry

COMMERCIAL

serves

...

£155,175,898

effort; te

to face the fact
that

sufficiently for considera¬ contended

settle

40
22

...

Street, W. 1

TOTAL ASSETS

able

irredeemable promises to

.....'L.i- 20

.___

Weekly

be¬

not

the

Offerings

64 New Bond

early 1930's a new
unintelligent set of
monetary reserves of that nation arguments developed to the effect
cannot liquidate those
liabilities that if other nations depreciated

page 9 in Second Section.

Twice

expand

—

You

measure

apparently

purse

such

*See article

things it

people,

'___

Whyte

the

freeing itself from

Governments..

(Walter

a
grain; but
something to

here.

ple's

...

Public Utility
Securities
Railroad Securities

Market

tem of irredeemable
currency thus

23.

Reporter's Report
Our Reporter on

Tomorow's

ounce

When the government of a
tion takes possession of
the

Observations—A. Wilfred
May...
Our

The State of Trade
and

grain is

ounce

cannot

tion

Securities Salesman's Corner
Securities Now in
Registration

altered when

ity

14
_

Prospective Security

fewer

Charing Cross, S. W. 1

Burlington Gardens, W. 1

and

of fine gold.

the

pressed

10
,

grains shall
grains in it

ounce

1/35 of

Washington Ahead of the
News—Carlisle Bargeron
Indications of Business
Activity

Smithfield, E. C. 1

amputate down to the
percentage
that is functioning.

that

___

NSTA Notes
News About Banks and
Bankers.

great

poison

teration of the number of
grains
in our gold dollar unit
of 1/35 of

Einzig—"British Devaluation
Disillusionment"..
From
Funds

the

squeeze

480

a
manner that suits us
The explanation of this
irrational¬

Dealer-Broker—Investment Recommendations.

Mutual

years

grain be made larger or
smaller, there is agitation for al¬

Cover

Field.

de¬

____

Shelf

8 West

;

Bishopsgate, E. C. 2

require

many

incon¬

itself.
Although
agitation for declaring

currency out of their system
that the best
thipg to do is
a certain
per¬
centage of their
circulatory sys¬
tem is dead and that

•

(Editorial)

Canadian Securities
Coming Events in Investment

and

with

have

Regular Features

Insurance Stocks

grain; but at that point
confusion

governments,

supposed
have in

As We See It
Bank and

Some

OFFICE—-Edinburgh

LONDON OFFICES:

the

HEAD

;■! Branches throughout Scotland

upon

ounce

Foreign Investment

Sakolski-

Incorporated by Royal Charter 1727

preciated currencies, decide that
they have gone so far with their
depreciation that it would

reveals

Strangman___

face the

that

Gaubis___ 10

Counter—Melchior

Royal Bank of Scotland

mone¬

there is

Palyi.
Deductions for Worthless
Securities
—Herbert Arnold

Tax

and

peculiar

metallic f

Shoup
Guaranteed Local Housing
Bonds—William G. Laemmel
Equity Share as an Inflation
Hedge (Recent European
and American
Results)—A. Wilfred May
The Business
on

sistency

Rights Offering?
SEC Commissioner

Recovery—Merrill

Europe

ounce

Colorado

—Harold A.
McDonald,
Gold and World

them by the free
world, that their
money will be accepted
only at
an
indicated rate of discount.
markets

standards of measurement as
the foot,
gallon, pound, and so on.
This is also true in
respect to the

devoted to the Convention

bonds

consequence is that nations

inadequate

fact, thrust

Spahr

such

savings

'» *■

either abandon the
practices that

tions.

currency,' to

created this condition

and

foreign :p

irredeemability of
itb promises to
pay reach a state
of
affairs .in which,
they must

domesti¬

cally '

National Security Traders
Association
Springs, Colo., includes the
following articles:

4-6551

buy

reserves and with
govern¬
mental policies of a
sort that tend
to perpetuate

people,

both

Section 2 of
today's

STREET, NEW YORK

Telephone: WHitehall

tary'4

tically every
activity of all

its

is'mo$t pressing,
safety is supposed to

where

standard

affects

23 "

MORE ARTICLES IN
SECTION 2

ob-

your

greatest.,-\,>y!, r. ?

money
reaches- and

22 ;

99 WALL

settlement

since its

23
Harvard Graduate School to
Study Monopoly in Business and
Government

depreciating

monetary unit

;

18 i

for

soletes.

those places where
they will pur¬
chase most, or where
the need for

importantthan

Standard Money Cannot Have

Price

has

ment & more

.11.

standard

Edward Neary, Says Gold

fixity. And,

Hold Convention in
Hollywood, Fla., Dec.
Analyzes Harvard's Investment
Policies_l__^__Urge Passage of Reed Gold
Standard Bill--.—
Gulf Oil Research
Costly But Worth While, Says Paul
Foote__
Deposits of Mutual
Savings Bank Continue Upward
Rand McNally Issues
Final 1949 Edition of "The
Blue Book"__
Stock Exchange
Forum Optimistic on
Economic Outlook
Port of N. Y.
Authority Asks Bids on $30 Million
Bonds__
One Bond Issue, Rather
Than Series, Proposed
for Cuban
Government

quick cash

sort of

nation

.i,;

A. T. Lyman

got
on.

17 ,'

;i9 /
*

You've

•

—

V:-Vv •"

give

out

of one's arm
Informed people do not
engage in
amputation unless it is
unavoidable.
1
The most basic
characteristic of any good standard
of measurement
is
that

either

Sylvia Porter Cites
Opportunities for Bank Profits in
Federal
Debt

Points

Devaluation of a
currency is like the amputation
leg; it is a great misfortune.

-15..;:

_______

accurate

A. Renard__._
Philosophy of the Fair Deal—Oscar R.
Ewing_
Trend of Capital
Formation—Starhl Edmunds
Preservation of Free
Enterprise Decisive to Our
Future
Harry W. Besse__

war.

rare

enough!

have something to live

misfortune, Dr. Spahr

duction.. Doubts devaluations
will
remedy dollar-gap, and holds no
predictions can be made
regarding effects on international
balance of payments.
Says U. S. currency should be made
redeem¬
able into gold.

Prices—George

is great

currency

isn't

instance where nation
purposely depreciated its cur¬
rency and maintains
change in price of gold has no close relation¬
ship as an external factor to the
price level, or as stimulant to
pro¬

—Philip L'eBeutillier
and

U. S. is

Work

"A RAGE TO LIVE"
on

describes currency warfare
before and after !ale

The Outlook for
Interest Rates—Marcus Nadler
When
Stockholders Weigh Their
Banks—Morris A. Schapiro__
The Railroad
Picture—Raymond J. Morfa
Must Meet Socialist
Trend Head On!—Emil
Scliram
The Gold Dollar—A
Check on Government

Devaluation

Asserting devaluation
;

—

The

Monetary. Policy

Professor of
Economics, New York University
Executive
Vice-President, Economists' National Committee

Four Sound
Industries—Roger W. Babson.
•The Current Business
Picture—C. F. Hughes

AMD COMPANY

By WALTER E. SPAHR*

Getting and Keeping Yciur
Customer's Attention—Kelso
Sutton
The Favorable
Outlook for Common
Stocks—Heinz H. Biel
The Summer-Fall
Stock Market
Rally—Joseph Minaell
Be Ready for
Second Phase of Postwar
Readjustment!
<

llCHTflWEIIl

And Related Elements

;

Cover

and Related Elements

—Murray Shields

Devaluation, Currencies

Page

AVill Business
Recovery Continue?—Sumner H.
Slichter
Federal Monetary and
Credit Policies—B. H.
Beckhart
The Outlook for
Business—Roy I. Reierson_

Albany

Chicago

Glens Falls

Street, Boston 8
2-8200

1-5
-

security buyers, and in¬

dividual investors.

York Curb Exchange

Hubbard

Teletype—NY

tutional

Stye

ffork Sirnejs

"All the News That's Fit to Print"

Schenectady

Worcester

Customer's Attention

Getting and Keeping Youi

discusses ways and means of gaining and rein¬
customer's interest develops from information and knowledge,

ing attention of easterner. Points out
and therefore calesman's aim should be
1

-■

soon as

to relate his

make sure that you have
have his full attention, you
unable to absorb your idea,

the person you are talking with. If you do not
have much chance of selling him, because he will be

do not

and$>

accept it,

along with

on
There

you

it.
are

different

at¬
Tne

kinds

gives up for a
listening to you.

tention.

first, the
'
willed" type
that a

Here

buyer

might mani¬
fest when he
is

being

so¬

licited

sales m a n
.

Sutton

Kelso

techis not

whose-

nique

very

good. The professional buyer

inwardly says to

himself, "Well,

paid to listen to this fellow,
and I'll listen. But it doesn't in¬
terest me very much," so he has
I'm

way of making hard work of his
listening, sitti g there and watch¬

because he is being paid to
do that. That is a kind of atten¬

ing,

tion

to receive,

that is not good

tention

kind

runs away

from you. That
a

salesman

of
concentrating the person's full at¬
tention
on
the
subject
being
doesn't

talked
The

get it back

ways

some

reason,

You

What
taneous,"

again.

of regain¬

tions

very

good

job

vacant stare there

might be some

of moving something before
his face, because there is no good
in continuing talking if you do
not have his attention. In such a
way

case

you

simply beating the
his listening to you at

are

air without

all, so you have to do something
to get him back with you.

reactions of their customers
see
if you can decide just

"conditioned reflexes." He

would

and at the time the
how intense is the attention being food was presented a bell would
paid the salesman by those cus¬ ring. He followed that procedure
for quite a few times and then on
tomers.
• ;
'
one occasion the food would not
>>
You, yourself, will see, if you
be there, but the bell would ring.
study another group during the
Of course, the
dog's reaction
sales interview, that there is a
difference certahdv, in the type has been tied up with the ringing
and amount of attention that a of the bell, and he has a con¬
customers
gives to a salesman. ditioned response to the bell, so
You see, if you fail to get this that he thinks the food will be
voluntary attention from the per¬ there too when he hears the bell
son

speak to,, you are quite

you

liable to be brushed off very soon

the

the material condi¬
the interview, we said

for

should try, as far. as

you

"voluntary" attention, head with a book, or do anything
gives of his own as radical as that, but you have
i'ree will, that he wishes to give, to do something to get him away
•because he is interested in your from what he has been doing and
get him back to you.
.conversation and in you.
A Russian named Pavlov con¬
If you observe other salesmen
in your board room from time to ducted a great many experiments
on v. the
subject of
time, what you migvt do is watch with dogs,
the

talked

about setting

fhat the person

and

remember when we

possible,

distributions.

may

feed the dog

ring, and

happen that during the

person's at¬

begins to salivate and
:

drool.

experiments, Pavlov
found out that there is another
reflex
that
he
had
to
guard
In

interview.

interview you lose a

present market picture, if we look at it superficially, appears
similar to the situation of April 1948, when I spoke "caution-

The
very

ingly" before this audience. The averages are at about
Then, as now, a major upward move was underway.
many
of our
chartist

went

friends

diag¬

move

was

the

nosed
as

you

has a hobby,- You

might think back and

try to de¬

cide just how you became inter¬
ested in that hobby.
Certainly,

did not take that hobby up,
overnight. You grew into it grad¬
ually. You were exposed to a cer¬
you

those

tain amount of

subject of that hobby.

it. Plans to

dropped. Credit
eased and cheapened in the

and capital markets.

The

for lib¬
Even Wall

gates were opened

flood
eral

to stop

out

all

money

eliminate these

each

the same level.
Then, as now,

raise taxes were

information on the
Perhaps a
friend of yours told you about it,
! I recommend that you do some¬
or you remembered
seeing some¬
thing along the order of these thing pertaining to it in a store,
about;
things, even if they sound a lit¬ and you gradually became more
third kind of attention is tle bit radical to you. Of course, and more interested in that par¬
you might call a "spon¬ you don't hit the man over the ticular subject.

happen i when

may

any

outside

by distracting influences,
of a sales interview.

cyclical recession
Expects more liberal dividend ■

through broader public spending.

bull
distracting in¬ new
market.
But
You can change the pitch of fluences, because they will disrupt
your voice, for one thing, and he your prospect's attention.
They here, in my
will notice the difference, bring¬ will divert him from what you
opinion, is as
far
as
the
are saying and if you can hedge
ing his attention back to you. Or, you can change the weight against that as much as possible si mi 1 a r it y
of your solicitation. Maybe it is then you are just making your goes. >
In what way
too heavy, and you can let up a
sales work that much easier.,
little bit. Or, if it is too light, go
does
today's
v: The next step, after getting a
situation
after it a little bit heavier.
person's attention, is that you
differ from
have to develop his interest in
How to Revive Attention
conditions
what you say. Unless you get a
Heinz H. Biel
i If the man's attention has been man interested in investments and prevailing
in
lost and you find him staring off
the spring and
'
, securities, you do; not have any
into space, you might make some
early summer of 1948? Why do I
chance of selling the man, •
physical action, reach over and
represent the optimistic side on
Interest develops from informa¬
this panel today, whereas I was on
drop something in front of his
tion, and from knowledge. The the other side .of the fence a year
eyes, a piece of literature — or,
more a person knows about a sub¬
and a half ago?
you might even jog his chair a
ject the more interested he be¬
little, or shift about in your own
The fundamental changes are
comes
in that subjeet. * Perhaps
chair. Or, if he should develop a
partly of a political and partly of

attention is
what I call a "fugitive" type of
attention, in which a man listens
for ; a
while and suddenly his
mind has wandered far from the
subject. You lose him. His at¬

h Another

are

prospect's at¬

attention is very easily lost

son's

ing his attention:

profes¬

sional

because

have

you

attention,

lose a
of

When you

tention

while. He isn't

dollar
business outlook,

of protecting funds from creeping

depreciation is in equities. Expresses optimism on
and confidence in Fair Deal's ability to forestall

sales canvass you have to

begin your formal

you

the attention of

Meeds

Economist, Laird, Bissell &

Mr. Riel asserts only hope

business to something customer is interested in.
as external stimulus to move customer to action. Gives list of buying
motives and describes their application.

salesman must act

Stresses
•

By HEINZ IL BIEL*

of {he interview, Mr. Sulton

Continuing his discussion

Stocks |

For Common

Salesmanship

Consultant in

Outlook

The Favorable

KELSO SUTTON*

Thursday, October 27, 1949

FINANCIAL CHRONICLE

«r

COMMERCIAL

THE

(1652)

public spending.
were permitted to parr-

Streeters

Deal's gener¬

ticipate in the Fair

osity with a reduction
requirements.
4

in margin
c
>

determination

Such

block

further recession and to halt
the
downward
readjustment of

any

regardless

commodity,; prices

possible consequences
could not fail to achieve results.
costs

and

had

well

the desired economic as
psychological effect. The

metal

deflation

prices

was

aggressive buying for
stock-piling
purposes, - and
the

stopped by

level of farm

prices was stabilized

the assurance of continued
government support.
In view of
such developments the need for
further liquidation of business in¬
an : economic
nature.
They are
closely linked to each other, of ventories diminished.
course,

ent.

and entirely

interdepend¬

Capital Goods

There were very few among

tell whether
Republi¬ the Fair Deal will be entirely suc¬
can
President virtually for cessful in its endeavor to forestall
granted.
No one seriously con¬ the cyclical recession in the cap¬
goods industries.
Industry
sidered it possible that President ital
Truman might be reelected.
It plans to spend less for new plants
Can the govern¬
goes without saying that I was and equipment.
among
the unenlightened souls ment offset this impending de¬

us, in the spring of '48,
not take the election of a

who did

who expected Mr. Dewey or some

It is too early to

cline?

opinion, yes, or at

be our next least to a very large extent. In
President.
On this expectation I addition to increased spending for
As
your
knowledge of your
based my opinions and predictions construction of highways, public
hobby grew, so your interest in¬
on
the
outlook for business in buildings and housing, there are
creased, accordingly.
still a few stimulating medicines
Therefore, when
you
contact general and the stock market in left in Dr. Truman's, kit.. He earn
particular.
new prospects and discuss invest¬
A change in the Administration give inducements. fo$ capital ex¬
ments with them, you don't have
by permitting ; more
might have been welcome and de¬ penditures
a chance of getting them as steady
rapid depreciation or by giving
customers
unless you, yourself, sirable for the investor in com¬
other tax
advantages, such as
feed them sufficient stimulating mon stocks from a very long-term
But I doubt very changes in the capital gains tax or
information to engage their inter- point of view.
much that it would
have been perhaps even in the double taxa¬
interest in your subject.
tion of dividends.
Furthermore,
bullish stock marketwise for the
That is one of the very basic
more immediate future.
I believe reduced cash requirements for
principles of salesmanship, the that a Republican Administration capital expenditures would permit
business of gaining and building
would
have
interfered far less somewhat more liberal distribu¬
up an intense interest.
Probably with the normal course of eco¬ tion of corporate profits in form
the easiest way to go about it is to
of dividends with the result that
nomic events than Truman's Fair
relate your subject to something
such funds would be spent on con¬
Deal.
The election last year co¬
that the customer is already in¬
incided
with the peak
of the sumers' goods rather than capital .(
terested in, and perhaps the sub¬
postwar boom.
A recession from goods.
ject in which he is most inter¬ this
I make no attempt to minimize
peak would have occurred in
ested is his own self, and his per¬
any
event.
It was more than the importance of currency de¬
sonal gains in life.
valuations in some 27 countries.
overdue.
On the contrary. I believe that we
We can not prove it, of course,
The "Personal Gain" Interest»
It

not

very

hard for an in¬
to relate his

salesman

vestment

other Republican to

but

believe that a Republican
would have permitted

President

shall feel

the effects of

competi¬

increasing degree both
own domestic markets as

tion to an

against. He called it an "inves¬
in our
the
necessary
readjustment of
well as in our exports abroad.
It
dwelling tigatory reflex," which had to do subject* matter to the "personal
prices and costs to take place. He
with the dog's desire to investi¬ gain" interests of an individual.
upon one
Fubieet for too long.
is because I expect the clamor for
might have applied the brakes
When that happens, it is because gate and change in the conditions Investments, I think, lend them¬
relief from
foreign competition
gently to prevent the recession
the
buyer has alre^y grasped around him. During these experi¬ selves more readily to associa¬
soon to become highly vociferous
from
gathering momentum and
what
you
were
talking about. ments, if a person walked by in tion with a buyer's personal in¬
—from manufacturers, exporters,
developing into a full-pledged de¬
You continue to discuss the sub¬ the hall outside the room where terests than most other products
pression. But he probably would labor, and local officials of af¬
ject and he drops away from you the experiment was being con¬ or services that are sold.
fected
communities—that I an¬
not have attempted to halt the
We are continuing with the un¬
because he is nmv ahead of you. ducted, the experiment would be
recession before the readjustment ticipate our government to take
folding of the salesman's solicita¬
That is one way you might lose canceled out.
We have two
was
even
half completed.
The remedial steps.
The conditioned response, then, tion. We have discussed the ap¬
his attention.
'
low
point in business activity, seemingly; painlessalternatives:
We are now on the
You can avoid that condition would not be the same, because proach.
and profits would (1) raise import duties to protect
threshold of launching the formal employment
our
home markets against "for¬
'by watching him carefully and of the variance of the dog's shift¬
probably have been well below
part of the presentation, itself, the
fwhen you know that he is right ing his attention to the person
the
level we have
experienced eign dumping," or (2) devalue the
development part of the sale, and
walking about, outside the door.
dollar.
Since the first alternative
up with you and has caught onto
this year or are hkely to see in the*
in doing that the first thing you
the point, then don't dwell on it If a light bulb should blink, there
near
future.
Yet, there would will not help our exports' and,
do is to get the person's attention
besides,
is considered "not Vbany longer but go the next point. again the experiment was thrown
have been a sound and solid base
and gain his interest.
Another wav you romht lose a out. If there were any distracting
for
a
subsequent recovery and eral," the devaluation of the dollar
A good question to ask your¬
influence
at all,
from time to
may be chocen as the easier way
person's attention as bv becoming
ex+ended period of prosoerity.
It won't hap¬
too
technical
and
losing him time, the experiment could not self, in preparing for this point of
President Truman did exactly out of the dilemma.
a
sales interview, is this: "Just
somewhere alorm
line because be worked.
the opposite.
After realizing that pen within tbe next six months,
Therefore, Pavlov built a new what do my customers want?"
but it may within two years.
he is not able to follow you, , so
the recession was well underwav
Just exactly why does any per¬
building, on stilts, so that there
I am
also quite aware of the
—the
Administration was a bit
son
leave an apartment up on
^Stenographic
of lecture was no jar from vibration, and
slow in recognizing this fact—he fact that the incompleted reces¬
East 72nd Street and come down¬
there
was
insulation about the
sion leaves many consumers' badly
given by Mr. Pidton. sixth in a
town to Wall Street and go into
Series on InSalesman¬ room, so no outside disturbance
squeezed.
Lower department
*A talk by Mr. Biel before As¬
one
of
the
investment houses
i^ll t^e story of d^clinship. snonsored
the Tnvestment could disrupt the experiment.
sociation of Customers Brokers, store
I mention that point here just there to make a purchase of some
Association of
vork, New
(Continued on page 27)
New York City, Oct. 21, 1949.
to emphasize the fact that a per¬
(Continued on page 24)
York City, Oct. 29, 1949.

tention

could

for a

that

whi'e.
vou

One reason

are

•

Volume

decline. "Moody's"
Spot Commod-';
ity Price Index made its
low at

Steel Production

Electric Output
•

State of Trade
and

332.7 in

Carloadings

Commodity ft-ice Index

By JOSEPH MINDELL*
Partner, Marcus & Co.,

Business Failures

Members, N.

.traction.

As danger signals he
cites

issues, downward

acceleration

consumers' goods

Scattered lay-offs occurred
during the past week as a result of
shortages, but many industries reported sufficient
supplies
near future.
October 1 figures show that total
claims for un¬
employment insurance dropped
by almost 4%, while initial claims
rose by 7%.

the

stock

ime

iroiii

The

the

"Monthly
Letter" of the National
City Bank of New York for
October, states
tendency of the devaluations will be to increase
the volume
perhaps even the value of United States
imports, and to reduce
our exports.
However, it is hardly to be expected that if our
imports
are well
maintained our exports will
decline much. The inconsist¬
ency of such belief is
apparent, the letter observes, since the
world
wants American goods and
services and tends to
spend all the dollars
it can get for them.
Demand for American
products has been held
back not by
prices, but by scarcity of dollars,
import quotas and simi¬
lar restrictions. If
business holds up well in this
country our imports
will continue
large, and, adds the bank letter, the
dollar earnings of
our
foreign suppliers will hold up.

verely

cycles.

the

With the elapse of another
week strikes in the steel
and bitumin¬
ous coal
industries continue with little
hope of early agreement. To
date the coal strike has
rounded out its fifth week
and the steel walk¬
out has begun its fourth
week; the former began on
Sept. 19 and the
latter on Oct. 1/
\
1
*

result

diminishing

coal

supplies, effective this Tuesday
midnight, the Interstate Commerce
Commission has ordered a 25%
in passenger
mileage on any railroad
having less than a 25-day
supply of fuel coal on hand.
at

The Commission
explained that this action was
necessary in order
to conserve reserve
stocks of rail locomotive
fuel coal which have de¬
creased to a
"dangerously low level" on some
are

railroads and stock¬

further decreasing.

The curtailment in
operations will last for two
months with roads
required to cut their operations
25% below the rate
they maintained
on Oct. 1.

bright spot in the week's news was the
announcement
day last by a company spokesman that the
Missouri

resume

this week

over

Mon¬

Pacific Railroad

complete

freight and

following

grievances.

passenger traffic by Wednesday
45-day strike of its operating employees
if

■t

stocks

are

to confirm this

low and yields

are

high,

seem

.And

rise.

government is

high,

exerting

ing

perfectly natural for

when it has been
strong for a few
months. But let us
examine the
stock market
rally itself in some
detail.

old.

It is now over four
months

According to

orists

have

some Dow the¬

just

had

bull

signal. (Incidentally, the
false signals of
May, 1948, and of
June, 1949, haven't dimmed their
faith

the

Dow

popular

theory.)

Services

Most

are

bull)sh—including

which

bucked
points of rise.-

the

first

'•>.-

ex¬

those

20-odd-

r••

;

Deterioration
And yet there are some
signs of
deterioration in the market's ac¬
tion.
I have
noticed, with some

concern, that the number of issues
advancing has been diminishing
the

that
are

successive

minor

lifts

past few weeks. That means
some sections of
the market
dropping out of the rise. The

rate

fered

never

which

stock

the

(Continued

page

29)

agreement in the

than

5,600,000

new

order
and

before.

only

this

the

task.

dominant

economyv under
w

And

}

..n.; <_•

i )

;

ua:a--

;

J
i

time

for

portfolios

full

the

contraction
to the

for

and

cutting

impact of business

before

taking boldly

buy side again. ;

Shearscn, Hamntiil Do.
Shearson, Hammill & Co.,

try¬

bers

the

New

mem¬

York

Stock

Exchange,

represents the de¬

John

of our equation, and
practical purposes depart¬
store sales are representa¬

ment

come

istered

office

522

Fifth

Avenue,

New

vO 'k City. MrL.

brisk rate of production. Notice
also that while department store

Vrlentine

declining, the percentage

Grimm
and

conducted

own

City.

severe

v.-,.

cu¬

SoundScriber Corporation

A growing factor in the office
equipment

CAPITAL

-y.

Sold

Coburn

;

New

YORK

Quoted

-i

York

Direct

■

&Middlebrcok ~.t

Lewis Street,
Private

Hartford
Telephone:

PROVIDENCE

..t

—

Incorporated

manufacturing field.

STOCK

(The Company's remarkable new model
is now on
display at the National
Business
Show. Grand
Central Palace, Lexington Avenue at 46th
Street.}*

'■!:!'

NEW

—

con;-

his
investment firm in New York
.

this

Co.

prior

thereto
year were

Bought

was

formerly with

of instalment credit sales has been

swift,

the
reg¬

repre*

uptown

assochr
with

sentative in its

low ground for recent years
This raises a serious
problem for

they suffered

Val-i

firm

new

rising persistently.
Commodity prices last

ated

It is

are

an¬

that

entine has be¬

noteworthy that, in the
face of increasing government ex¬
penditures and high national in¬
come, department store sales, sea¬
sonally adjusted, have declined to

sales

•

John H. Valentine With

for all
tive.

combing

the market to

side

mand

condi¬

year

been

Association of Customers
Brokers,
New York City, Oct.
21, 1949.
i'

sections

these

nounce

Retail trade

by Mr. Mindell before

yet to

contracting volT

small

consequences

We have

severe.

the effects of

wait

econ¬

has

market

ditions of good cheer.

talk

So far we have

the

meet

our

which

contracting volume
break-even
points

through

Cycle

government
—

corporations

back—to

cur¬

We have to
grasp that it is cycli¬
cal contraction of these
dimensions

ing to offset

groping to evaluate
earn'ng power! < of

few industries—and there it

This

plant and equipment cyck
is
especially volatile. It can shift
from a $20 billion rate one
year to
a
$10 billion rate another year.

private sector of

spend¬
devaluation

The

that the

despite

years

government

higher

tions.:,,

•;;Volatile^

in the

their

around

currency

Many

ever

ume

rent

omy

are

gov¬

prices

average

faced with

our

grey iron castings have

Plant and Equipment

ev'e|)

econ¬

controlling

recent

been

has been

structura"

participated very little in the
business rise.

the

observed

see

Sensitive

figures for

though this is almost
unnoticed under the
present con¬

Jones

for

majoi

historically high, and earlier

has had its heartJn this
one, and steel

This has further
complicated efforts to reach
"fourth week of a
tieup that has cost the nation

being of¬

40-bond average hasn't
yet ex¬
Murray is badly beaten,
according to ceeded its August high, and second
metalworking weekly, in its current sum¬
grade rail bonds are well below
mary of the steel trade.
their August high.
There are other
capable executives in the union but
industry
leaders are afraid
Thus we have a few indications
they lack the power to hold the
membership in in the
line.
Aside from the
texture of the market ac¬
present dispute the steel
industry's relations
with labor have been
tion itself that this
remarkably good for many years and
general area
industry is one for
would like to keep
things that way, the trade paper notes.
selling rather than buytrouble ahead if Mr;
"The Iron Age," national

think

extraordinary strength.
steel

entertain all of the
optimistic pos¬
sibilities for the stock market

the

consumers

It is

cycle.

durable

role -Of

future. It has swung be*
and 190 in the Dow*
Industrial Average several

times.

than

the

160

have

and

near

tween

are

beginning to accelerate on thf
down-side after a long period o

great deal to stimulate the
stock market.

up¬

hazard for the present stock
mar¬
ket that these two
cycles are now

sav¬

Snd

the

•<' ;v

supply
become

has

much smaller

corporate

two most impor¬

goods

infla¬

mulative figure of down-side vol¬
being made to settle the steel strike without ruin¬ ume
that I keep has been mount¬
ing the prestige of Philip Murray as President
of the Steelworkers'
ing persistently. The Dow-Jones
Union. The rank and file

cle,

for

ket has
the

are

other

demand

the

that resulted in a 17% increase in
their commodity prices. The. mar¬

cy¬

obviously the

tionary force. If js doing

item

stocks

for

high level
ing and a

component cycles at present
the plant and
equipment

tant
are:

come

set

high level.

ernment,
common

wors

accumulation

The

England,

lows

this overal

the moment

However, the

surface, the

stage would
further

point
the

was

seen

after

omy, with a

or.

swing, with construction runnin^

money supply is
ample, arid the stdck market has
shown a remarkable

ior coal and steel strikes
will
an end.
On the

major

spring

have

inventory

are now

see

our

the

potent influence

the

spending in our gen¬
economy.
Notice that

eral

the
cycle

inventories—which

from

Last

cycle.

hope¬

ratios

mid-November. quickened,

STEEL OPERATIONS THE
CURRENT WEEK SET AT
9% OF
CAPACITY, A DROP OF 0.3 POINT

men

view.
one

national income
and employment

tremely

The fourth week of the steel
strike finds
metalworking slowing
down at a faster
pace though still in
relatively high gear, according
to "Steel," national
metalworking magazine. Most fabricators are
maintaining operations close to pre-strike
levels, living off inven¬
tories. A few shops are
strike-bound, and only a few others have been
forced to close or curtail for lack
of steel. Certain
manufacturers have
enough metal for another three or four
weeks. Some of them are
turning to substitutes, such as aluminum. This latter
metal, however,
also may be in
tight supply soon because of strikes at a
number of
Aluminum Co. of America
plants. In the main, fabricators'
prospects
are bleak with steel
stocks shrinking
alarmingly. Unless the strike
is quickly
ended, the magazine notes, general
contraction of metal¬
working is expected by Nov. 1. Even
automotive shops that held
comfortable steel
supplies at the strike's start will be"
pinched by that
time with plans
already prepared to cut operations by

Efforts

business

And now, after almost 25
points
rise, some of the Dow theorists
tell us that we are
in a bull mar¬
ket. And as we look
around, there

Price-earnings

the most

between

supply—and

government

mainly by fluc¬

tuations
not

market

will

Normal seasonal
helped, and we had a
fine
background for our stock
market rise,
*
-

cut

piles

.'/''

resume on
Monday of the current week to bad news. The short interest
Director, Cyrus S. Ching, and officials of is at a record
high level for 17
Corp. It appeared
unlikely, it was reported years, and sooner or later our ma-

that there would be
any early intervention
by the President.
Mr. Truman at his
press conference on
Thursday of last week
urged labor and management to
get together and settle the
in the interest of
dispute
themselves and the
country. Stating he had no
at present for
plans
seizure of either
industry, he added, he still hoped me¬
diation would be successful.
a

rate

consumption.
influences

indifference

Talks were scheduled to
between U. S. Conciliation

Joseph Mindell

ful view.

cycle,
cycle,

equipment

consumers'

the
item

ample.

number of componen
most important onei

goods
inventory cycle.
Several minor recessions
have
started in the recent
past, but
these were caused

that

seems much

cycle

and the

were be-

low

business

construction

and

durable

cur¬

tailed

The

the

are:

plant

se¬

they

and
of

American

consists of

e rrous

metals, inventories had

•

trade,

lationship

important

the probable

;

Exaggerated

two

factors whose
bullish influence is
being exagger¬
beyond their true importance.
One
is
the
money
supply—al¬
though this provides an excellent
floor beneath
us,
the prices of
individual commodities or
prod¬
ucts depends
primarily on the re!-

The Busines Cycle

and some

are

ated

the

merely minor?

tex-

high.

Factors

There

market

the

n o n

new

Bullish

coming stock
decline?
Are
we
war¬
ranted in assuming that it
will be

ti.e

aits

dimensions

market's tech¬
nical condi¬
tion.

rising to

problem is: what

1948 highs had

improved

are in
ample supply.
Each of the minor
business re¬
cessions in recent
years was fol¬
lowed by a new
high in general
business activity.
Now for the
first time, business
activity is not

retail sales in face of

stocks.

time that

modities

con-

—

ing

de-

that the

7the United States Steel

•ally.. The,

year-Jong

and

•

Many of

splendid

d e e n

devaluation

market.

jjioven

Textile trading volume
increased noticeably the
past week.
Spot
demand for many items in the
cotton gray goods market
remained
high with an appreciable rise in the
commitments for first quarter
delivery. Orders for sheeting, print
cloth, broadcloth and osnaburgs
also rose
noticeably, while combed cotton gray
goods remained in
moderate demand.
-f

same

modify Price
Index
actually
slipped to a new low. Most
com-;

spending.

in my "Forbes"
magazine
turned bullish for an
intermediate

of food continued at a
high level last week
with total dollar volume
slightly below that of a year ago. The whole¬
sale demand for meat
remained near the
high point of a year ago. The
order volume of canned
goods was steady and high with
most com¬
mitments for immediate needs.
Flour bookings,
however, remained
small.

Last

Commerce'1 Com-!

business and the stock
column all this
year, in June 1
rise in both business
activity and
had the good
fortune to catch what

market

Wholesale buying

Stock Exchange

business

After having been
aggressively bearish

material

diminishing number of rising
plant-equipment and durable

cycles, and declines
government

for the

effects

September.

from its low, at the
the "Journal of

Market analyst maintains this is
time for
"combing-through" port¬
folios and
cutting-back holdings, in anticipation of

year ago.

the

and then rose to

however, this index had re¬
treated to
334.8, only a few points

Total industrial
production last week held to the
pattern of pre¬
ceding weeks, with slight increases in the
output of some goods tend¬
ing to offset reductions in others. The
over-all effect was that of sus¬
taining total output at a level
moderately under the volume of a

Discussing

350

week,

Food Price Index
Auto Production

Industry

June,

Retail Trade

■;

1, Conn.;
DIgby 4-6713

1' .L

PORTLAND, ME.

Four Sound Industries

Ready for Second Phase

industries having promises of great growth and

building and convey¬
(3) telephone industry; and

offering good investment prospects: (1) road

(2) labor saving machinery;

ing;

Manhattan Company

Economist, Bank of the

Vice-President and

Mr. Babson lists

SHIELDS*

By MURRAY

By ROGER W. BABSON

Readjustment!

Of Postwar

Thursday, October 27/ 1949

FINANCIAL CHRONICLE

COMMERCIAL &

THE

(1654)

A
.
(4) food merchandizing.
With
much talk about automobile, steel, coal, textile, shoes,
resumption of war boom, New York bank economist warns *!
InrliieL'iQn 1-iAtriwrf
Ji
reached their peak X—
for this
stimulative influences may soon end, in which event we should be ready for second phase of posh ,, clothing and other industries having
industries have yet greater
readjustment. Holds, however, no great depression need be expected, though government policies
-businessahead?" In reply I ask: mention four such:
cycle," readers will "What
growth
ivoad Build-<£
must be changed to avoid long business decline. Stresses need of lower government expenditures,
ing
and telephone industry. It is being
relief from high taxation, encouragement of private investment, and abandonment of unnecessary
■

Asserting recent recovery does not represent

rl f

AfLni'

onrl

K» cf

war

•"

harassment of business.

Conveying:
Billions
of

pronounced expansion in business probably does not represent a resumption
of the postwar boom but; rather a necessary corrective movement following
overdeflation in orders, inventories and prices which took place earlier in the year. The move¬

the

been^

ment has
as

has

because

the

govern-

tion

around

duced

which

without

are

not

year
a likely to have real prosperity.
Thus
it
appears
that
unless
number: of

mid

economic

"shots-in-the-

arm,"

among

which

were

government policies are changed
we
face a long period of read¬

justment, in which business is not
likely to be either very good or

bad and which might well be
purchases described as a "no boom-no bust"
for the stock¬ period with competition intense,

aggressive

piling T

oper-

very

profits low, unemployment high
enough to be uncomfortable but

effect

stimulative

elaborate government aid to the sion of business, the increase of
housing industry, revival of agi¬ job opportunities, the expansion
tation for maintaining agricultural of incomes and the increase in our
price supports at a high level, the standard of living—all of which

relaxation

credit

ment

controls for instal- clearly the economy is
brokers' loans producing.
Such a

and

development of plans for

and the

capable of

period

j frustration would be comparable

(only

difficulties

;

economy;

the V entire

•

mitigate the justifiable feai
of vacillation /or violence in/crecLit

policy by formal

that the

next period of pros¬

„

into an

perity will be converted
inflationary boom;

(6) advocate a labor

law which/

public, management
and organized labor alike and de¬
mand that the unions cooperate
with management in the elimina¬
tion of featherbedding inefficient
cies
which
sap /the
nation's
is fair to the

the standard of

'.iving down;

|in which we shall have to live we
these! cannot afford to be weak. With
.

(7) issue a directive to govern¬
ment regulatory agencies calling

d'„

new

over¬

must

passes

Our

built.

entire

trans-

problem, from
/

needs

conveyors,

efficiency

over¬

and

planl

city

costs

reduce

could

roads

better

ano

My favorite company,
field
is the
Link Belt

this

Its

stock sells on

about 61.

the

Exchange

Stock

York

New

have a little stock

telephone company which

the

serves

community. The man¬

your

of your telephone office
gladly give you particulars.

ager

will'
-

is
the one thing we alL must have.
There are many good independent
Food

Merchandising:-: Food

grocers and small grocery chains
which are entitled to your patron¬

I think it is

age.

however, that the A«&

service
is

increase

and

conveyors.

Company.

labor

generally agreed,
P sets the
pace
for the entire food mer¬
automobiles chandising industry as' to quality,
portation

Roger W. Babson

hauling. ' Every

underpasses

down

(5)

very heavy foreign aid through
to the
we expemilitary assistance, government j rienced in the middle 30s and it
stimulation or guarantee of in-1 must be avoided at all costs, for
strength and hold
vestment and the European Aid in a world as dangerous as that
Program.

cities. ^ Thou¬
sands

and * fairly
relations;. All you

management

readers should

large

our

only moder¬
impressively

spent
inlets

day; it has ex¬

every

good

and exits to

foi

abandonment of
a t i o
n s
announcement not high enough to bring a crisis, the pegs on U. S. Government
Murray Shields
security yields "by the Federal
that the pay¬ and the whole process of capital
Reserve Board so that its power)
ment of $2,8 billion of veterans' expansion grinding slowly to^ a
can be used to stabilize the money
At that point it would be
insurance funds would be acceler¬ halt.
obvious that' the government had supply instead of forcing; so vio¬
ated, the return to aggressive easy
lent
an
expansion during thr
money
policies by the Federal in fact failed to provide an en¬ recession in business as to threat¬
Reserve authorities,' adoption of vironment favorable (o the expan¬
,

capital

government revenues
ately but have an

new

soon

improvements, re¬
move
the more onerous restric¬
tions in Section 102 of the Internal
Revenue Code, give personal tax
exemption to a small amount loincome from securities and relax
the restrictions on margin require¬
ments—steps which would reduc-'
new

respect to taxes, business regula¬
tion and labor management fric¬

intro¬

m e n

mst

depreciation on expenditures

(3) The failure of the govern¬
ment to take those actions with

sharp as it

must

.dollars

The recent

used

cellent

prices. Truly it

low

and

wonderful organization,

The stock of the Great

Atlantic /

foolishly threat¬
ened by government suit)* sells on
the New York Curb at about $126
&

Pacific

(now

There are very.
investments.
Instead

share.

per

better

few
of

labor
Not onlv is the need for better
troubles, or World War III, invest
transportation vital,, but it will be your money in,one of these four
industries.
easy to raise funds for such pro¬
We do not object to

jects.

worying about inflation, or

gaso¬
the

line taxes if we are sure that

being spent for better
bridges, etc. Auto¬
mobile
owners
(and there are
40 million of these) also like the
new
toll bridges and toll roads
such
as/ have
been
built
in
Pennsylvania,
Connecticut
and*
Maine. Not only are these under¬
money

roads,

Business

Man's

Bookshelf

takings good money earners, but
their
bonds, being non-taxable

have a ready market at low rates
of interest.
it is incumbent
Competition Among the Few—
for an end to unnecessary harass¬
and
similar Market
Labor-Saving Machinery: The Oligopoly
worn
themselves out in a few upon all of us to use our powers
ment of business and to the talk
of persuasion to induce the gov¬
Structures
William Fellner —
months,
in which event we
for government only way that manufacturers can Alfred A.
ernment to adopt policies which about subsidies
Knopf, New York, N. Y.
should be ready for the second
successfully meet labor's demands
will stimulate instead of obstruct plants—a shift to reasonable pro—cloth.
•
/
for more wages is through the use
phase of the postwar readjust¬
business
policies not requirinf
an
orderly but persistent expan¬
of more labor-saving machinery.
ment.
This phase might well in¬
Financing Utility Capital Re¬
sion of private business
enter¬ that the government grant favor.' One of the leading companies
volve a-reduction in export
quirements—American Gas Asso¬
prise. v Anti - deflation
policies to business but merely that i
manufacturing such is the Amer¬ ciation-Edison Electric Institute,
demand, the tapering off of stock¬
should stop persecuting it.
have their role to play, to be sure
ican Machinery & Foundry Com¬ 420 Lexington Avenue, New York
piling operations, moderate de¬
It is clear beyond any doub'
but what this nation needs des¬
clines in a number of industries,
pany. This stock is listed on the
17, N. Y.—paper—$1.00.
that this nation can have prosper¬
perately is a set of practical
sheh as automobiles and housing,
New York Stock Exchange anc
Invisible Barrier—A Tax Spe¬
sound and effective pro-prosperity ity if the Administration wants i1
sells
around
1312. I
personally cialist's Analysis of the Business
which appear to be about ready
seriously enough to take a few
policies. In my personal view, it
know its President; its manage¬
for
a
delayed
transition from
Cycle — George T. Altman — Depractical steps to revive confi¬
sellers' to buyer's markets, and an is not only desirable but neces¬
ment is very progressive. There
Vorss
& Co.,
843 South Grand
dence and revitalize private
accelerated
decline
in
capital sary for the Federal Govern¬
are
also
other
good companies
Avenue, Los Angeles 14, Calif.—
initiative.
and
the
entire
industry
looks fabrikoid.
outlays by business.
While such ment to—
(!) dissipate any fears that gov¬
a/combination of forces could
bright to me. Liberalism Stands for Freedom
ernment finances are put of con¬
easily bring the level of business
A
small
company
developing —Towner Phelan—Foundation for
by
making an immediate
to a lower "low" than was re¬ trol
labor-saving food machinery, in Economic Education, Inc., Irvingcorded in July of this year, virtu¬ reduction in government expen¬
which my family is interested, is
ton-on-Hudson. New York—paper
ditures of the $3-$5 billion which
ally no one expects that it would
the Atlantic Coast Fisheries Com¬
single
copy,
no
charge; 10
be more than a "readjustment- competent observers assume to be
(Special to The Financial Chiionicle) .... ■
pany. This owns all the stock of
copies,
$1.00; lower prices on
recession" since the stage does not both feasible and essential and by
LOS ANGELES, CALIF.—Har¬
the
Fish
Machinery
Company larger quantities.
appear to be set for a great cycli¬ refunding a substantial portion oi
old W. Berry, Basil Bancroft, Jr., which is developing very wonder¬
floating
debt
into
inter¬
Two Paths to Collectivism —
cal depression.
The basis for a the
and George L. Frederick have beful machines to take the bones
mediate or long-term bonds with
Russell J. Clinchy—The Founda¬
reasonably good level of business
out
of
fish
and
make
fillets
tion for Economic Education, Inc.,
is to be found in the rapid in¬ maturities and coupons attractive
mechanically. For the most part
crease
in our population, which to institutional and individual in¬
Irvington-on-Hudson, New York
even today, from the time a fish
increases markets; the revolution vestors;
—paper—single copies, no charge;
is
caught until it reaches your
in
industrial
10 copies, $1.00; lower prices on
technology, which
(2) give
the
taxpayer
some
dinner table, hand labor only is
stimulates investment, and in the hope
by
stating publicly
tha*
used. Fishing is both the oldest larger quantities.

likely that some of
influences will

prospect,

have this

stimulative

—

Berry, Bancroft, and A
Frederick With Fewel

—

far-from-weak financial
of

our

citizens

concerns:

ance

and

which

our

position

there

business

that

provides

assur¬

against financial crisis.

probably to be found in three
policies of our government:
(1) The

determination

Administration

well

of
as

the
Con¬

the financial resources
of the government to the limit in
order to prevent depression.
gress to use

(2) The refusal of the Adminis¬
tration to permit a rapid readjust¬

prices, costs, etc., which
a
position from
could have a really pro¬
nounced revival; and
in

ment

would

which

establish

forward

the

$10-$15 billion

shift

its

policies

with

re¬

public works, relief and
loan activities so that instead of

perpetuate the
boom or to prevent desirable re¬
adjustments in the economy they
are
held in readiness for use if
them

necessary to

alleviate fear of mass

stimulate

the

Spring Street, members

Los

Stock Ex¬
formerly with

Angeles

change.
All were
G. Brashears & Co.

and
requesting

Mr. Shields be- that Congress eliminate capital
Virginia Manufacturers gains taxes, alleviate double taxaAssociation, Richmond, Va., Oct J tion of corporate dividends, perthe

associated with Fewel & Co.,

453 South

individual

*An address by

21, 1949.

Harold W. Berry

come

unemployment;
(4)

j mit

moderate

acceleration

Live

By—Edited by
Simon and

—

Schuster, Inc., 1230 Sixth Avenue,
New York 20, N, Y.—cloth—$2.50.
Bituminous

Coal

Annual—1949

—

spect to

using

Nichols

Facts & Figures — Bituminous
of the
Coal Institute, Southern Building,
greatest labor saving inventions
Washington 5, D. C.—paper.
is the telephone. The industry is
very
progressive. Before long a
Joins Gordon Michie
new
telephone writing machine

reduction in the debt;

(3)

William

Telephone Indusiry: One

permit

a
substantial reduction in tax rates
and

sells on the New
at about $3.50 a share

of this company
York Curb

Words

antiquated-

ly operated. It is greatly in need
of more mechanization. The stock

in government

business investment by

fore

industry and the most

contraction

would

which

outlays

and

looking
when im¬
is

international

situation will justify a
of

taxes

new

government
to the time

provement

severity and duration
the readjustment, the key is

As to the

will

the

Max Davidson
Max Davidson

Opens

will engage in a

securities business from
215

West

City.

75th

offices at

Street, New York

will

This will send
regular telephone
absolutely
confidential

available.

anywhere,
circuits,

and instantaneous messages,

in the

and
with his signature. This machine
is 'being perfected
by the TelAutograph Corporation. Its stock
sells on the New York Stock Ex¬

sender's

own

handwriting

I will gladly
particulars regarding it to

(Special

~SAN

send

the

Gordon

of.

Chronicle)

Michie,

CALIF.—•

582

the staff
Market

Street.

Toppell With Newman
(Special

to The

has

Financial

Chronicle)

Jack Toppell
become associated with Frank
Newman
&
Co., Ingraham

MIAMI,
D.

optimistic

The Financial

Ewing Harper has joined

change at about 0V2.
anyone.

FRANCISCO,

entire Building.

FLA.

—

Volume 170

Number 4850

THE

COMMERCIAL

FINANCIAL

CHRONICLE
(1655)

The Current Business
Picture

From

Washington
A head
of the News

By C. F. HUGHES*
Business News Editor The New
York "Times"

Contending high

income and savings have provided
major cushions against a nose-dive in
sees threat to
stability if steel strike is prolonged.
Says people are
waiting for lower prices and customers are
CLEVELAND—Here in
getting "choosy," but because of cut downs in
Cleveland, which is unique in many
production
schedules, recession has been avoided. Notes
respects—for one thing it has
long had economists and financiers
ebbing in capital goods expansion,
r
who get their voice
except for home
building and concludes impending increase in
through the Washington and Wall Street din-^
imports may spell lower consumer
one
of the grossest cases of
prices.
ingratitude in history is about to be
I haye
rarely tackled a tougher job in this
"mocked." I say "mocked" because it is
subject of Current Business Trends. The
the con¬ reasons
must be as evident to
sensus of opinion of
observers that Phil Murray
you as to me. In short,, the man
who is
and his CIO do not
running the traffic
intend to do a thing to the signals for business is playing with the
green and the red and the
of
things right
Stop and Go. The scheme
Communists in the CIO at the latter's convention
<e>

business,

By CARLISLE BARGERON

consumer

prominent financial editor

—

now

which is scheduled to
begin Monday. Meetings
of the executive
board have been held this week
and
the
skids

prepared

for

the

general

unfortu¬

still,

nately is sub¬
ject to change
without

meeting.
j
>
In recent months Phil has achieved a lot of
publicity about what he intends to do to the Com-

versary

no¬

Of the CIO's
supposedly 6 million mem¬
bers, it is estimated 1 million are Communist led.
It appears to
observers in this preliminary week
that Phil is to do a lot of
of invectives but in

shouting and spattering

the end the CIO

be pretty much the same.
Where the ingratitude

that

Carlisle Bergeron

instead

picture will

the

enters

today

in,' though,'.is

this

can

paid off in dollars and cents.

You would think that when
they en¬
the convention hall there
would be placards and banners and

cheering delegates bespeaking the praises of their
founding fathers.
Instead there is to be the sham of
abuse, but only that.
/
It has a decided
bearing on any study of men of Murray's and
John L. Lewis' stripe, that the records of
the House Un-American
Activities Committee are replete with
facts and figures on how the
Communists organizedJ this great American labor
movement.
The
evidence is crystal clear on how
they organized and led the
sit-down

strikes in motors, on how
they
York by which men and women

set up' the chain picketing in; New
chained themselves together and lay

the sidewalk to prevent entrance to
business establishments. The
evidence is abundantly clear as to how
they seized the state capitals
of Michigan and ,of
'Wisconsin.
on

The nearest Roosevelt the Great
ever came to
condemning any
of this was
when, in the case of the strike in Little
Steel, he said
"a* curse on both their
houses," and |John L. Lewis retorted it ill be¬
hooved a man who had
supped at labor's table to say
anything like
this, and it did. '
•.
\ •
I
In the years
past, the American Federation of Labor had
spent
millions of dollars and caused
any amount of bloodshed in an effort
to organize the mass
industries. The Communists showed
how to do
it and so if the organization of
these industries is an
accomplishment
inthe American labor
movement, the Communists should be praised
by both Phil Murray and Bill Green because the
uplift of the workingman is all their hearts bleed for.
,

trouble.

•

Lewis, Murray and the late Sidney ;Hillman, the
American Activities Committee records tell
us, knew

understand

forefront

the

Commies and

$6B,000

side

step

that

seems

portant

are

only

he didn't

CIO

•

So I think it is

to make that

thrust

this

Conference

Commercial

kicked

Pressman's attitude could

him

out.

had

1940

not

have

been

For years his inclinations
had been well known.

Companies, Inc.,
City, Oct. 25, 1949.

said

that

'48

lot

great build-up he has gotten
since

Pressman

left

Pressman.

labor statesman.

him.

2l/s%

now

them

the

mature

that

Priced

such

The

the

Financial

Moseley

Co.,

La Salle Street. He
with

the

Chicago

Northern

yield 1.20%

are.

CO.

the

CC
,

November 1,1964, inclusive

CO. Inc.

A. G. BECKER &

CO.

BLAIR

incorporated

GREGORY&SON

HEMPHILL, NOYES, GRAHAM, PARSONS
MERRILL
•

LYNCH, PIERCE, FENNER & BEANE

Chronicle)

135

was

South

formerly

Trust

municipal

division.

Co.

bond

H. Lyons Opens
H.

L. F. ROTHSCHILD

ILLINOIS COMPANY
;

(incorporated)

HORNBLOWER & WEEKS
F. S. MOSELEY & CO.

HIRSCH & CO.

Bache & Co. Adds
:

T:*e

Financial

CLEVELAND,

Chronicle)

OHIO—William

L. DeMora has joined the
staff of
Bache

Co., National City East

Sixth Building.

ADAMS & PECK

OTIS & CO.

•

ROBERT W. BAIRD
'

CO., INC.

"j- "

CO.

incorporated

KEBBON, McCORMICK

&, CO.

SCHWABACHER & CO.

JULIEN COLLINS &, COMPANY

MULLANEY, WELLS & COMPANY

F. S. YANTIS & CO.
incorporated

October 26, 1949.

HAYDEN, MILLER & CO.

SWISS AMERICAN CORPORATION

CLAYTON SECURITIESCORPORATION

THE MILWAUKEE COMPANY

incorporated

WEEDEN

FREEMAN & COMPANY

McMASTER HUTCHINSON & CO.

WILLIAM BLAIR & COMPANY

(Special

■

& CO.
yyv;-'

WM. E. POLLOCK &

FIRSTOF MICHIGAN CORPORATION

Lyons

a securities busi¬
from offices at 1 Main
Street.

CO., INC.

(incorporated)

PHELPS, FENN & CO.

.y,y .yy,.

HARRIS, H ALL & COMPANY

&, CO.

^-'yyy''.-y

engaging in

ness

page

2.50%, according to maturity

EQUITABLE SECURITIES CORPORATION

him

JEROME, ARIZ.—F.

Certificates are subject to authorization by the
Interstate Commerce Commission.
may be obtained in any State in which this announcement
is circulated from
only
of the undersigned and other dealers as
may lawfully offer these securities in

R. W. PRESSPRICH

Murray has not yet, in the

CHICAGO, ILL. — George J.
Bielby has become associated with
F.

(Continued

such State.

THE

(Special

who

■

current

crises are bound to be
mixed—
and the mixture is all on the
un-

they

George J.Uielby Joins
F. S. Moseley & Go.

this

as to payment of principal and dividends
by endorsement
by Southern Pacific Company.

He has seemed to

policies, whatever they

Issuance and sale of these
The Offering Circular

supposed to be making to rid the CIO of
Commies,
being subversive. His grievance is that
to the CIO

results

unconditionally

HALSEY, STUART
him

with

simply won't adhere

lines

The

$1,052,000 annually from November 1, 1950

To be guaranteed

fcig

will be laid dff
their plants lade

gener¬

Undoubtedly Murray misses

fact

other

Equipment Trust Certificates
(Philadelphia Plan)

ware¬

the

Company

incorporated

shortly because

Equipment Trust, Series

latter

When he went with

owes

A settlement

necessary material.

other three weeks before the fur¬

Southern Pacific

surprise to Murray.

workers

either idle

are

tlement

Significant enough

charged

soon

$15,780,000

famous,

the

campaign these inclinations became

owes

the

econ¬

steel set¬

this week will put the steel
work¬
ers back on the
payrolls hut not

goes out to¬

tomorrow that

just

plants closed down.

has been
reached, indus¬
try authorities say it will be an¬

New

But they had never been
any secret to Murray.

Indeed, Murray

fight he is

Re¬

ceivable
York

day

sour.
were

heavy de¬

word

when
-

mands reported by the steel

houses

to curtail.
Steel will put on
dramatic demonstration of how

Even if the

Spring

market turned

manufacturers

surpluses, therefore, are
expected to bridge much of
the gap caused
by this tie-up. This
was made clear
by, the

will

essential it is to the nation's
omy.
;
1

car

the

Steel

important

away.

limp ahead a little
Big construction projects
will
feel the pinch.
Appliance
manufacturers have already start¬
a

started
forward
pur¬

their

late

not

longer.

*An address,
by Mr. Hughes at
luncheon session of the National

Committee.,

very much.

Motors

and,

secondly, what is

Pressman, who

shrink

have

reduce

producers

curtailing both orders and pro¬
duction rather
sharply as demand
for their products seemed
to fade

are

fronts

dustry ; Ford and Chrysler will
chop off by Nov. 15 and General

leveled off:from what looked
for
while like a real downturn

refused to say, on the grounds of
self-incrimination, whether or not
he was a Communist—this
before the House Un-American Activities

Henry Wallace in the

save

upon

today
most

labor

tie-ups in steel and
Dependent industries
slowly
quickly must throttle down on
operations. ,In the automobile in¬

just

But I am at a loss to know
when Murray came to be
indignant
towards these fellows, when he came
to look upon them as
unaccept¬
able citzens. Because all
during the war, all during the -time of his
Presidency up until the eve of the 1948 Presidential
election, he had
at his right hand and
was putty in the hands of Lee

men

crisis

trends

subject

pe¬

other lines. Even

some

Appliance

fair statement

few vain

industrial

the

the used

coal.

the

the country at a
very inopportune
moment.
First of all we have

catapulted Lewis to power, and Hillman, underwrote the
carrying out
of his resignation threat.

ally known.

resign his CIO Presidency. But, of course,
Roosevelt, using the same Communists who had

this.

mugs.

deep chagrin now. After being in the
movement, Rooosevelt saw to it that these

speech for Wendell Willkie

mean

Business

therefore

automobie

chases

long¬

see

care

But the crackdown on in¬
ventories which started
early this
year applied
almost as much to

and

have to bow before his
Hitler-

esque edicts.

im¬

very

action

President of the U. S. would
their precious

itself

industry will

the

riod.

House^Un-

not elected he would

were

because

over-reach

essential

been

how the reserve would
take
of needs over the
shutdown

steel

eyebrows.

hope, his lust for

wanted ,Mr.

faces

and

had

and

the

will

power

Lewis'

Hillman

radio

just prolonging the

was

they were play¬
ing with fire; Lewis and Hillman
having had painful experiences
with these babies before. But
they were naive enough to think that
once
they got their set-up they could get rid of hem. Lewis and Hillman, according to the Committee's
records, needed experienced or¬
ganizers badly. The Communists had them.
can

„

•

-yC.F. Hughes

last

Each

Truman

pipe-lines

overflowing before
deadlock happened, one could

speedy

strike

bushy

„

week the main idea of.
both par¬
ties to the
disagreement was that

mediation

full

Some day, let us

the

scenes

coal

supply

Mr. Lewis continues to
glare from
beneath
his

told that

behind

The

10%.

mere

main

moment.

was

industry

—ta

considerations which

different category and will re-,
there, I suppose, as long as

will be
producing
in volume. So six
weeks' produc¬
tion has been lost for all
except
a ismall
segment of the

war

certainly

are

settlement.

the

strike

k nown

the

naces once more

I feel most
business will agree
should have meant no steel
strike
at all or most

report
at
W a s h i
ngton

than

These

with

ad¬

at least.

years

will

out

mediation

steel

equipped

world

imagined would
sole possession for
another

our

few

What

u n

Phil's hurling invectives at these
fellows he should greet them with
open arms. He
owes his job to them.
The whole CIO owes them more

come

munists.

tered

tice.

face

now

weapon which

37)

(1656)

Government, Business and Labor
Must Work for Common Good
,

of this country has been almost fabulous since its founding,
or during the last century, or in the 50 years spanned by the life of your organization.
these records of progress are matters of common knowledge.
As we come closer to the

All

day,
of

the

tempo

so, taken in the perspective of
preceding decades,
have given
many
thoughtful persons confi¬
dence to make projections that are
about that optimistic.
I need cite
or

ccelerating,
being

not
a

rested.

Aga i nst the
somber back¬
d

sion

only two, which come from par¬
ticularly significant sources and,

the

drop

both from persons
call "colleague."
My former and long-time col¬

by coincidence,

the

30s,

whom I may

stim ulus of

touched

war
a

new

achieve¬

ment.

vealed

latent

re¬
Edwin

p. Nourse

for
production, not demonstrated be¬
fore, powers which were inherent
powers

imour natural resources, our

high-

Square, Boston 9, Mass.

economic power made us

the

.at

the de¬

contributor to victory and

cisive

Economic Growth," at the

month

(Of England and our other allies.
-"While
individual
deprivations

tears

and

conservatively

"founded

got

past."
can

lift

war

would

rave

people,

8,000 000

perhaps

10,-

000,000 workers in'o the ranks of
the unemployed.
But we passed
■from victorious war to vigorous

35%

market

Employment

Act

<e&lls

and

under

purchasing

engendered by free com¬
petitive enterprise complemented
by prudent but vigorous public
enterprise and sustained over the
years with only moderate ups and
power,

downs.

may

facsimile

thereof."

As-we

now

.approach the year-end, I am not
prepared to offer you any assur¬
ance, private or official, that we
shall do precisely that well next
year,
throughout the decade of
*An address by

fore

National

Dr. Nourse be¬

Retail

Farm

Fkfcuipment
Association;
Wash¬
ington, D. C., Oct. 18, 1049.

make large retire¬

room

for

how
Moulton derived his factor of

Mr.

substantial

reduction."

tax

Nor

not

too

clear

altogether sure that

same

time reduce the pub¬

debt

and

cut

"hitching

our

has

stars"

practice,
pose

been

and

taxes.

But

wagons -

lic

good

it is

to
the
American

not my

pur¬

to quibble with the precise

terms

either

these

coura¬

projections. I want to call
your attention rather to the fact
that in both cases, the prospect
geous

of great

progress

is made condi¬

plainly that
his projection is only "concerned
Mr.

Moulton

says

with economic potentials, as gov¬
erned

resources

and

produc¬

Mason

Wis.

Analysis

—

COMING

EVENTS

(New York, N. Y.)
of the Invest¬
ment Bankers Association annual
dinner and election at the Hotel
New York Group

Pierre.

York

of Baltimore—

Analysis—Stein Bros. & Boyce, 6
South Calvert Street, Baltimore 2,

Association

wood Beach

New

Douglas Aircraft Company,

Inc.

Lewis
Wall Street, New York

& Co.,

5, N. Y.

;

Hotel.

1949 (New York City)
York Security Dealers As¬

Dec. 9,

—Special review—John H.

meeting and election.

1949 (Hollywood, FU.)
Investment Bankers Association
Annual Convention at the Holly¬

Dec. 4-9,

Md.

our sons.

1949 (New York City) „
of Stock Exchange

Nov. 15,

firms annual

Consolidated Gas Electric Light
& Power Company

Field

Oct. 27, 1949

Eastman, Dillon

15 Broad Street, New

Investment

5. N. Y.

I must say
that as I look
about me I ; am
filled with real concern. ! can¬

sociation

at
Ballroom.

Annual Dinner

24th

the Hotel Pierre Grand

Two With Waddell

in easy optimism.

Corporation of & Reed, Inc.
Minneapolis — Analytical study—
(Special to The Financial Chronicle)
BEVERLY
HILLS,
CALIF.—
Paine, Webber, Jackson & Curtis,
Mehrle K. Gouker and Bertram
25 Broad Street, New York 4, N'.Y.
M. Meyer are now with Waddell
First Bank Stock

Business at Fault

Both Labor and

economist, I do not see
standards of life being raised ade¬
As

quately out /of enlarged produc¬
tion when a great labor organi¬
zation sees the current situation
occasion

"the

the

hours

for

reduction

hours) with full pay for
redundant labor force and when

week (21
a

Oil Ventures, Ltd.—Late
D. Sherman & Co., 30

Gaspe
data

—

Reed, Inc., 8943

pensions at 60 are demanded for
population steadily becoming
longer lived.

Bingham, Walter

With
Oil

Corporation—Study—

H, Hentz & Co.,

60 Beaver Street,

New York 4,

York 5, N. Y. /

Pine Street, New

Gulf

Wilshire Boule¬

vard.

work" i [to 35 or

production, unaer prevailing and
impending conditions," or when
the czar of coal orders a 3-day

(Special

The Financial

;

Chronicle) *

— H.
affiliated *
Bingham, Walter & Hurry, »
621 South Spring Street, members
»
of
the Los Angeles Stock Ex- change.
He was formerly with G.

LOS

CALIF.

ANGELES,

Paul Keller has become
with

Hugoton Production

Company-

Analysis— Hill, Richards & Co.,
G. A. Saxton & Co., Inc., 70 Pine
Street, New York 5,

N. Y.

Brashears & Co.

1
too

and

filled

Radio

fires

Morgan

Co., Incorpo¬

lines and distribution rated—Analysis—Laird, Bissell &
rather than capitalisti- Meeds, 120 Broadway, New York

supply

patterns

(Continued on page 30)

71 LOS

5,N. Y.

Financial

to The

(Special

Chronicle)

C A L I F.—

ANGELES,

formerly with
is now as¬
sociated with Crowell, Weedon &

Walter A. Wolford.
G.

and

Weedon

With Crowell,

Corporation—

with

the demorali¬
zation of the delicate adjustments
of

Hoffman

apprehension Analysis —- Hill Richards & Co.,
621 South Spring Street, Los An¬
when I Took to management
y ' ; \ . • ;
see it choosing
the costs of geles 14, Calif.

banked

tional.

—

& Co.,

Keyserling could

at the

East

225

Co.,

Street, Milwaukee 2,

Columbia Broadcasting System,
Inc.

simultane¬ 30], "lest the productivity of the
labor force exceed the power of
ously raise wages, farm incomes,1
the market to. absorb, the total
and business profits so fast and

Mr.

at least "a reasonable

and ,to defraud

fathers

groups

national debts

the

leave

and

•

to be the rock on which
the
non-Soviet future can
be
built. To falter or to lag in our
be to dishonor our
task would

not indulge

of production,

thought that they

accepted

underlines a

Keyserling argued that that pro¬
jected national production would
also "be enough to achieve bal¬

employment and purchasing power
for the United States, but I ven¬
ture the

Bingham-Herbrand Corporation
J. Mericka

But in all seriousness,

ments

tion—Analysis in current issue of
"Business and Financial Digest"—

life for a gen¬

stepped up to a pace which would
provide a decent home for every
American
family." Finally, Mr.

anced budgets,

Wisconsin Bankshares Corpora¬

memoran¬

Loewi

progress,

development
and
"home

enlarged,
all income

Bulolo Gold Dredging.

—New circular—Wm.

glimmering unless they are in¬
telligently and diligently brought
to pass. The free world looks to
us
to be the pacemakers of that

just and
healthful

for

building

dreams

improved,

urogram

available

Also
dum

responsibility. Those
progress
will go a

tremendous

parts."

long-range resource

not prepared to say

the maximum

both

N. Y.

115 Broadway,

Optimism

in, its mouth. No, it

social
security
health and
education better provided for, the

that 1948 and 1949 precisely meas¬
ure

Counter
Industrial
Booklet recording

—

from it—Goodbody & Co.,
New York 6, N. Y.

money

eration born with a silver spoon

Furthermore,

would

march-of-progress act.
It
for maximum
production,

^employment

an economy

Easy

not mean an easy

of income and oppor¬

which

in all its

■which I have the honor to serve

somewhat

essential for

^guides of the productive process.
The

;

tunity

with

stimulators

with more than

$4,000/'

the parity

plump pay envelopes and an un¬
precedented reserve stock of
liquid
savings,
resumed
their
normal but now enlarged role in
the

e v e

rapid relative gain than the popu¬
lation as
a
whole, because our
rural areas have not yet attained

filled and trade relations were re¬

Consumers,

income

minimum

peacetime reconversion with
amazingly little lost motion.
As¬
sembly lines were switched back
io peacetime goods, pipelines were
-established.

$40 billion left to "improve in¬
come
in
the
higher brackets."
Farm incomes would gain "almost

postwar

&lump, that demobilization would
throw

&
Co.,
Inc., Union Commerce
Building, Cleveland 14, Ohio.
all this review
of predictions of progress lead up
Christiana Securities Company
to? To me, it proclaims an al¬
Analysis—Francis I. du Pont &
most
self-evident
truth
that,
with our traditions, our training, Co., 1 Wall Street, New York 5',
">'!v
and our resources, the march of N. Y. //.v//■:
economic progress from here on
should
be
even
greater—much
Colombia Bolivia—New study—
greater—than the quite creditable Zippin & Co., 208 South La Salle
record of the past. But that does Street, Chicago 4, HI.
No

This, he estimates, would per¬
fainilies to "reach

reasoning by analogy, prophesied
that

the

Now, what does

mit almost all

around

many

upon

billion by 1958,"

security
risks of

and to
vigilance
which prevents any one group
from seeking to benefit unfairly
at the expense of another."

goods and services from $262 bil¬
lion in 1948 to
about $350

Postwar Slump Prophesied

the

Index

10-year performance

maintain that regulatory

On this basis, he said, "we
our total annual output of
.

against the hazards and
modern
industrial life,

growth that we have
achieved during good years in the

Over

Stock

give

which

Land, systems

rates

healthy sweat."

After

them in the perspec¬

takes to put

for the next 10 years

family losses were grievous,
it could be said of the nation as
a whole that we lost some blood,

and

few

—

envisaged a march

ago,

of progress

such

Jobs in San Francisco

Water and

gigantic proportions
■did not reduce us to the blood,
sweat and tears that were the lot

shed

Philadelphia 7, Pa.

consider the kind of

Demo¬

cratic Party Conference on

our

nection about a year ago, even a
of

Study

Tishman Realty & Construction
of 35 indus¬ Co., Inc. — Analysis — Dreyfus & ,
trial stocks—National Quotation Co., 50- Broadway, New York 4,
and management," price and wage
NV Y.
<:•:
.
,
nomic Development;" * envisages a
Bureau, Inc., 46 Front Street, New
doubling of population during the policies "which will allow enough York 4, N; Y.
capital accumulation to expand
next century and
an eight-fold
Warner
Bros. Pictures, Inc.—
rise in general standards of liv¬ productive facilities and provide
Stocks versus Dollars — Discus¬ Summary and opinion—E. F. Hut- <
ing.
I ■ enough purchasing power to buy sion of currency inflation—Jacques ton. &* Company, 61 Broadway,
the full product
a satisfac¬
Coe & Co., 39 Broadway, New New York 6, N. Y.
; j..-' Mr. Keyserling's Optimism
- r tory program for completing the
York 6, N. Y.
My more recent colleague, postwar adjustment of agricul¬
Western Union — Brief memo¬
Vice-Chairman Leon Keyserling, ture," and government programs
randum—Bruns, Nordeman & Co., ■
Titanium Metal—and five good
in
his
address,
"Prospects for "to conserve and build up our
60 Beaver Street, New York .4, >
natural resources, to improve the companies well placed to make

higher average of consumption
-than they had ever known before.
As I remarked in another con¬
war

Trust Building,

—

Co., Liberty

in values—Hecker &

York 5, N. Y.

tive of reality fc>y. adding that, - to
Moulton of the
achieve them, "we need ever-im¬
Brookings Institution, in his recent
book, "Controlling Factors in Eco¬ proved cooperation between labor

time permitted the
people to enjoy a

same

masses

Railroad

Pennsylvania

Co., 1 Wall Street, New

du Pont &

economic
Market Observations—Monthly
St. Louis San Francisco Railway
organization and practices, public report—Harris,
Upham
& Co., Co.—Study—Vilas & Hickey, 49
and private, that would be needed
14 Wall Street, New York 5, N. Y.
Wall Street, New York 5, N. Y.
to bring these potentials to actual
Also available is a table of com¬
fruition. "What principles, meth¬
Most Fascinating Business in the
parative figures on Public Utility
ods, or policies," he asks, "must World
Brochure describing the
Bonds.
be pursued in order to realize in
processing of various kinds of
fullest measure our national eco¬
transparent films, foils and other
nomic goals?"
Shatterproof Glass Corporation
;
materials—The Dobeckmun Com¬
—Memorandum — Peter Barken,
Mr. Keyserling too, after out¬
pany, Cleveland 1, Ohio.
32 Broadway, New York 4, N. Y.
lining his 10-year targets, under¬

...

grade labor force, our accumu¬
lated capital, and our capacious
credit
reserves..
That -enlarged

Portland Cement—Late
Post Office

Oregon

Microscope—Analysis cf
as a whole—Francis I.

Market

league, President

blaze of

off

Ill

N. Y.

data—Lerner & Co., 10

5, N. Y.

the market

power." He thereupon turns

tive

rest of this

for the

It is notable, however,
that the events of the last 10 years

progress
seems
to
be
S

50s,

century.

Broadway, New York 6,

quarter of 1949—New York Hanseatic Corporation, 120 Broadway,
New York

Study—Ira Haupt & Co.,

New

Comparative figures
leading companies for the third
—

Service-

England Public

New

Companies of

Trust

and

Bank

New York

The economic progress

present

parties the following

President

declares that aH groups, in industry as well as politics, must (1) display
^initiative, prudence, and self-discipline; (2) recognize that they cannot get more out of the economic
♦system than they put into it; and (3) acknowledge collective bargaining in good faith as the road to a
workable distribution of total product. Holds monetary and fiscal tricks have no power of magic but are
»sa slippery road to misery.
In second talk at New School doubts benefits of "implemented planning/'
Outgoing Presidential Adviser

the

send interested

will he pleased
literature:

that the firms mentioned

It is understood

Economic Advisers,

.Executive Office of the

;

Recommendations and Literature

G. NOURSE*

By EDWIN

Chairman, Council of

Dealer-Broker Investment

Co.,

Brahears

650

South

Spring

members of the Los

Exchange.

Street,

Angeles Stock

Volume 170

Number 4850

•

THE

COMMERCIAL & FINANCIAL CHRONICLE

(1657)

Opportunities for Bank Profits in
Federal

Refunding!

By MARCUS NADLER*
v.

Sylvia F.-Porter tells Iowa Bankers
Treasury refunding operations
by note offerings in open market will give
leeway in purchasing gov¬
ernment obligations in favorable
maturity ranges. Sees billions of
intermediate

bonds,

beginning

1952,

becoming

eligible

Dr.

is fiscal

York
news

securities, "ot the utmost practical inter¬
bankers is the prospect that
Treasury notes soon will again
become
a
announcement was
what is to come. V

re-

—

fundings

and

ings and that

trading

exercise

is nd

profit
opportunities
•will

the

Speaking
b

f o re

63d

t h

convention
it b

profit

annua

the

tution

Sylvia F. Porter

Bankers Asso¬
ciation

ernment

debt

bounds

ap¬

Hotel ' Fort

keeps closely informed

Des

management

will

debt

moves

and

on
Oct.* 18, Miss Porter
forecast that a new era in gov¬

start

the

all

management
times is aware

Miss
the

Porter

predicted

coming shifts in

that

government

significance of debt
management policies will lie
the Treasury's August announce¬
definite "opportunities for banks

ment

that

refund

notes

the

$4.3

will

sold

billion' of

bonds

called for December is
being defi¬

nitely underestimated
investors," she said. *
"This
move

many

improve

the first major
from the postwar re¬

their

earnings while
enhancing the safety of their portJ
folios.

-And in them will lie im¬

portant

clue

should

marks

away

policies

other

banks

markets,

outside the highest
grade govern
bond list."!

ment

funding pattern which has pri¬
There are opportunities for ad¬
marily involved certificates and justments right now in the
gov-;
just

few

return

notes.

the

forecasts

ernment

use

notes

banks

prime medium for bond refundings in the next couple of years

"It

market

are

has

which ' many

overlooking, she added

been

long-standing tradi¬

tion among
bankers, for instance
financing, to scatter maturities throughout a
when and if
necessary through the bond list and to place their port¬
open market. " Notes, which are folios
primarily in shorts and
also

and

for 8 deficit

government

obligations

maturing intermediates and partly in longs
between one and five
years, have But this blind adherence to a pol¬
virtually disappeared from the icy because it is traditional and
government list since the war.
popular many be contrary to an
"In 1950,
there will be more institution's interests.
As an il¬
note

a
offerings to refund called lustration,
portfolio
divided
bonds and quite
possibly, notes to between certificates and the longraise new cash in the spring.
The term bank-eligible 2V2S may pro¬
vide greater safety,
1953-1958
maturity
ranges
are
earnings and
definitely scheduled for filling as chances of profit than a portfolio
bond maturities come up for re¬ including various maturities and

funding in the next few
"Not

only

does

that

mean

bankers

concentrated

years.

this

prospect

will

have

opportunities to purchase govern¬
ment obligations in maturity

they

ranges

have

favor.

direct

impact

also

will

upon

the

now

ma¬

few bank-eligible issues

turing in the mid-50s which have
until

now;

enjoyed
value.
In

scarcity

unusual

addition, it
beginning

mediates

provide

the

needed

bonds

will

bank

become

purchase.

of bonds will

government
"Banks
the

nore

eligible for
supplies

These

drastically alter the

market

which

ig¬
will

forfeit

important chances to adjust
their portfolios for maximum

safety, income and appreciation."
the refundingfinancing problem of the Treasury
is
viewed,
the
above
analysis
•

makes

way

sense,
Miss
"At today's

tinued.

costs

and

most

even

ranging
widest

the

interest

for

may

3%,
in

may

costs;

demands

ings; it

the

save

money

it may meet bank
more

varied

offer¬

extend the debt and

this

fail4.

nature

It makes

intelligent and

sense.

The August

commodity

and

wages

prices
Dr. Marcus Nadler

dustries

accumulation

ket has to be protected. Such
pro¬
is undoubtedly sound be¬

tection
cause

market

impor¬

the government
is sound..

was

bond

crease, and this in
lease the pressure
to

Economic

ujUlCz

conditions

1949

will

the

;•

the

will

continue

1950

and

large

readjustment

obliga¬

It will

extent

which

division,

would

the

de¬

the

the
»tion, and par-, were quite different from those
heavy goods industries, notably
ticularly since the Treasury had that prevailed in 1948.
Business
steel and automobiles have
to go
an excess of revenue over
expen¬
activity tended to decline. The through^ If the
upswing in busi¬
ditures; the-monetary authorities index of industrial
activity, which ness does continue,
however, a
did not hesitate to raise the re¬ was 195
in October
1948, declined moderate firming in short-term
serve requirements of the
mem-; to 462 in July
1949.; Commodity rates can-be expected. On the
ber
banks and to

erate
rate

increase

permit

the

of interest.

fact that the

midst

mod¬

country

was.

the

in the

serious -^inflation
demand for money on

the

partr of

industry

very

and

trade

was

which

Banks

underwent

Federal

were

government

low¬

government

reduced and

securities

that the policy of maintaining the

actually
long-

government bond market orderly
would remain unchanged.
4

1948 taught
important V lessons,
that the monetary

The Outlook for Short-Term Rates

banks

experience of
very

namely.. (1)
authorities still

consider

in the past, the outlook for
short-term rates will depend on

credit

business
of

the

were

Reserve V

"An

also
considerable change.

The short-term rates of in¬

terest

Reserve

bought several billions
term obligations.
The

ered.

requirements

change in the
willing to buy gov-; open market policy of the Reserve
securities
in the open authorities took
place. Neverthe-*
and in support of .the less, the Reserve Board
reiterated

market,
prices of

some-

Reserve

were

ernment

the

The

conditions and their policies

ad-:

the

policy of maintain¬
ing an orderly government bond
market.
They established a rate

deficit.

monetary authorities were quick
to realize the
changed economic

the

thef authorities

great,

converted into

was

and

hered

prices decreased and the number
of unemployed rose. At the same
time, the surplus of the Treasury

short-term

But despite

address

Annual

Dr. Nadler

Convention

Finance
Industry,
City, Oct. 24, 1949.

This advertisement is under

for sale,

partly

or as a

The

activity

and

the policy
Right now the
the country is wit¬
upswing
which
is

Treasury.
of

nessing
an
partly seasonal

Commercial
New York

the

economy

the

result

circumstances to

solicitation of

some

character -and
of

the

buy

hand,

business

next year tends to
rates will witness

erate

only

rates,4

further mod¬

degree

swings
however,,

moderate

very

acter.; > Onefair

activity
decline, money

decline.;-The

•

short-term

may

state

in
?

in
can

char¬

with

"... The

operations of the Treasury
play an important role
in the money market. In the
first
place, it is known that the Treas¬
ury is operating with a substantial
will

also

deficit

and

will

in the market

ready

last

have
a

August

appear

borrower.

Al¬

the

Treasury
through increasing the
supply of Treasury bills. Secondly,
borrowed

the

Treasury will be

confronted

with the task of
refunding a large
amount

matured

(Continued

and

page

called

35)

as an

any

certifi¬

offering of these securities
of such securities.

$40,000,000

Indianapolis Power 6s? Light Company
First

its risk."

Mortgage Bonds 2%% Series, due

Treasury and

1979

Due October 1,1979

the Federal Reserve Board at this

;

moment

may be characterized as
state of "relative inertia."

Miss

Porter

suggested.

"For

months, the business situation has
been the

key determinant

Price

in fiscal

102.125% and Accrued Interest

and debt management
policies and
it is now.
In

high

circles,
come

near-term
and

Washington

opinion

recently has be¬
decidedly confident on the
outlook

for

increases

bank

sive rate and would
were

strikes not

receipts

are

impres¬
up

are

again

now

over

$5.5

billion,

running

including

gold, which plainly

(Continued

page 22)

-V

Lehman Brothers

Drexel 6s? Co.

Goldman, Sachs 6s? Co.
Glore, Forgan 6s? Co.

Hayden, Stone 6s? Co.

The First Boston Corporation

Union Securities Corporation

Hornblower 6s? Weeks

Paine, Webber Jackson 6s?Curtis

Tax

ahead of receipts in the
compar¬
able period of the fiscal
year in
1948.
The Treasury's balance is
the sterilized

obtainable from the Undersigned.

Production

interfering.

actually

are

pro¬

loans

gratifying.
in September rose at
as

Copies of the Prospectus

business

barring disastrously

Hallgarten 6s? Co.

Central Republic

Company

(Incorporated)

Riter 6s? Co.
October 21, 1949

certainty that in
all probability the
swing in the
certificate rate, which at present
is the most important short-term
rate, may fluctuate between 1 and
iy4%.

replen-

be considered

offer

other

offering is made only by the Prospectus.

The

weight
the

>•

upswing
through

carry

tell.

can

re¬

banks

present

one

pend-.to

turn
on

government"

Whether

market
in

acquire

tions.'

...

still in opera-

in¬

of business is
upward the demand
for bank credit is bound
to in¬

the stability of the govern¬
bond

basic

have

contributed to the
inventories it is
difficult to say. While the
trend

mar¬

activity " was
a high level
but, broadly speaking, the basic
and the spiral
philosophy underlying the support

cates, by so adjusting its portfolio,
an
institution actually could de¬

choosing note viewed

prevent an undue and potentially
dangerous concentration
in
the
shortest-term area.
It
may,
in
truth, uphold a refunding policy
of

institution.

levels,

has

tant fartor in the general
stability
of the economy.
One may crit¬
icize some details of the
policy

individual

crease

the

movement

longed strikes, authorities in the
Treasury and Reserve Board ex¬
favorable position. pect
satisfactory business to con¬
on maturing bonds
tinue
through
the
year-end.

latitude
It

may

long-term bonds provide the earn¬
ings necessary. And since in this

itself

higher; rate
a

With coupons

coupons.

finance

may

favorable

it will be in

con¬

interest rate

levels*, the Treasury
at

Porter

1948,

liquidity

these

The policies of the

changing/outlook

Whichever

year
to year
maturities may be made available
at the
various dates desired

picture.

minimize

and

since

the

from

portfolio

intermediate

safety

and

course

inter

such

1959/56 2V^s and
The certificates

over

rolled

billions

the

the 1958/56 2V2S.

should be stressed that

1952,

and

the

economic and political factors be¬
hind those moves."

"The

soon.;

important for influenc- ishing of
inventories.
To what
ing business activity, and (2)
that.] extent threatening and actual
irrespective of business activity strikes in some of

ment

when business

and

actual

Moines

within

measures

prices, the government bond

the present

re¬

income

propriate safety unless that insti¬

Iowa

maximum

con-

•year.

our

turning

was

asively

during
1948
during

program

and

lives. "It is impossible
for an institution to
carry out a
realistic investment

banks."

in-i

d emonstrated

profound influence on
investment markets for the

rest of

open

management and fiscal policies of
the Treasury and the
Federal Re¬
serve
Board
will
continue
to

beginning
in
December,
new

This

"The? key point for all institu¬
tions to remember is that the debt

cashfinanc¬

terestrates.;

first hint of

position of Federal Government.

—

ment

bond

the credit

est to all

for

affecting interest rates, forecasts little change in
present level
in the foreseeable futureSays principle uncertainty in picture

rates, short-term as well as long-term,
depends primarily on busi¬
activity and the status of the Treasury. Both these factors
have a direct
bearing-on
policies of the monetary authorities, which in turn exercise
a
powerful influence
on
the move-^

ness

major medium

rates

/ The trend of interest

U. S. Government

current situation

long-term and shorMerm
'

for

Professor of Finance, New York
University

Nadler, reviewing

of both

bank purchase.

According to Sylvia F. Porter, Financial Editor of the New
"Post," and Editor of "Reporting on
Governments," a weekly
letter on

Tucker, Anthony 6s? Co.

Weigh Their Banks

When Stockholders

Stocks

Bank and Insurance

•

current year net operating earn¬
York City banks have been maintained; at

reported by New
generally stable level.

/■/■;>. .'f ;
Although there have been a number of divergent trends within
-the banking field, the different forces have tended to offset each
other with the end result one of relative stability in operating earn'ings-

bank

'>v - <

'■

Today we are to
think of their banks?

was

credit.

the reduction of

particular importance in this connection is
required reserves. Approximately a year, ago, reserve
at central reserve cities were equal to 26% of net
-After two reductions of two percentage points, they are
There :has also been a reduction in the reserves
Of

requirements

capital accounts of these institu¬
tions on June 30, 1949. We can¬

many

ness

loans were

is difficult to speak'
stockholders of any one;
There are groups!

stockholders whose

among

inter-j

not parallel.: For

example,, there are the stockhold-;
who
are -customers
of the

ers

other busi¬
the bank;
employed by the

bank; those who have
relations
with

ness

who

those

are

stockholders

who

others.

changes in the last

Discount.

three quarters

period of 1948.

First

Bankers

Chemical
r>

0.74

0.63

0.58

Bank.

0.75

0,73

0.67

0.75

0.73,

0.81

Commercial National

0.86

0.83
4.46

0.85
4.05

0.78
4.78

4.27

0.34

0.33; 0.33

0.32

0.35

Trust

-Manufacturers

1.16

1.19

1.17

1.20

1.15.

3.92

0.81

0.77; 0.81

0.80

0.79

Trust.—

1.55

1.56

Public National—

1.09

1.13

1.54
1.14

1.58
1.19

1.62;
1.15

'Adjusted to present
ers

capltalization-

-2,250,000 shares.

1.02

0,08

1.07

3.48

3.46

10.55

10.62

2.40

4.71
3.38

In reviewing
be kept in

the foregoing figures

mind.

tion of several of

several considerations

should

followed a uniform

these methods.

example in the above

the different accounting considerations
in mind in reviewing the earnings statements.

cism involved,

Another factor which

should be remembered

market

the

should be kept

few in number, whose
ownership among private and in-,
stitutional investors is nationwide.
These 50
constitute by far the
banks,

largest portion of the 14,200 op¬
erating
commercial banks and

-companies in the United
States, whose shares are quoted
and
traded daily.
Undoubtedly,
'the -valuation
of these leading
bank shares affects the market for

in connection with

Several banks reported losses in security transactions last
these should all be converted into .profits 4n 1949, with -the
that total earnings will compare favorably with those of a

year ago.

all bank

banks,

120

Exchange

BROADWAY, NEW YORK 5, N.

Telephone: BArclay 7-3500
,

„

Bell Ttfctj?ve—NY

(L. A. Gribbs, Manager

X-12iS-i9r^
Trading Dept.)

(Special

The

721/2

book

here

define

Financial

23.7

973.03

495

49.1

293

32.2

175

49.2

25.8

344.78

value?"
book

Mr.

30.7

54.29

451/2

16.2

42.62

221/4

47.8

—

Peoples First

86.17

30.

Philadelphia National

31.
32.

Pennsylvania Company
Fidelity-Philadelphia

33.

Corn Exchange

35.84

13.5

81.30

43.4

73.37

46.8

348.68

Cleveland Trust

35.

248

28.9

National

City — r—_L—
Central National —r

37. Bank of

38.

39.

43.

48.

CITY:

50.

Trust

—

29.0

Northwest

COMPANIES:
Corporation
Bancorporation—

First Bank

Stock

23.6

13.8

50.8

65.1

14.67

Midland

.Corporation

270 /

217.53

Bank-.———-

HOLDING

Tremium.

10.5
31.0

75.17

:—--

(N. J ):

First National

l. Marine

"National Bank-—

JERSEY CITY

49.9

49.91

PATERSON (N. J.):
49. First

45.3

145

353.50

National Bank—

Commerce

191/4
138

64.81

Bank—

Mississippi Valley Trust——
City

28.1

49.18

Mercantile Commerce

47.

210.11

Bank

46.

KANSAS

32.5

275.38"

45.

>441/2

35.16

National Bank

Fifth Third Union

First National

31.8

65.92

87.63

Bank..

ST. LOUIS:
44.

25.7

451/4

—

■CINCINNATI:
42. First

*32.2

5-31/2

66.33

California Bank

First National

76.09

PORTLAND (Ore.):
41.

>; 44.4

29.50

America

Security-First
American Trust

45.00

40.

32.2

30 M>

45.00

CALIFORNIA:
:v

s::2.7

—

CLEVELAND:
34.

881/2

;

36.8

—,

PHILADELPHIA:

311/2

49.81

National

17.1

270

325.89

Mellon National

29.

BANK

_ —

28.

share of common capital
stock account, surplus, undivided

address

28.6

79.31

National Shawmut

27.

total per

*An

134

—-

PITTSBURGH:

And let „us
value as the

Schapiro
before the National Association of
Giradot
has
with Wm. C. Roney & Co., Buhl Bank Auditors and Comptrollers
.at its Annual Convention; Phila¬
Building, members% of" the "New
delphia, Pa., Oct. 25, 1949.
York and Detroit Stock Exchanges.
—

41.80

187.59

National

First National

26.

question is,
selling for less

Chronicle)

Thomas C.
become
associated

DETROIT, MICH.

31.5

169

BOSTON:

J. P.

Stock

47.5

Bank Detroit-..

Detroit Bank

■

York

27.3

107

432.29

—

25.

the recurring

"Why is my stock
than

37.0

575

105.83

Trust

Manufacturers

New

421/4

67.09

40.4
■

221.39

National

24.

36.

their

profits, and reserves for contin¬
In regard to the trend of operating earnings for the final quarter
gencies. It is the stated net worth,
of the year, the pattern should continue to be one of relative stability
or
the stockholders' equity per
with final results comparable to 'those of 1948. ;.L yvVr ///•••//.
share based on official reports to
the
banking
authorities.
Some
stockholders
whose investments
Bache Adds to Staff
are'recent ask also, "Why is the
'-(Special
-The Financial Chronicle)
additional stock which my bank
CLEVELAND, OHIO—Robert C.
allowed me the -privilege of sub¬
Childs, James H. Denney, Richard
scribing at a' discount from this
L.
Gollwitzer, Lane Jonap and
book value three or four years
Incorporated
Arthur L. Moore are now affili¬
ago,
selling now for less than
ated with Bache & Co., Nationall
what I paid?"
;
"
City East Sixth Building.
Analysis on request
The$e questions are often coun¬
tered' with — "True, - bank stocks
With Wm. C. Roney & Co. are selling at a discount, but so
Members

Trust

Continental Illinois

23. National

stocks.
stockholders weigh

When

14.5

37'/4

203.90

City National Bank——

"trust

this year.

Laird, Bissell & Meeds

52%

790.63

22.

of 50 large, well
In this group are

group

29.5

____—

Harris

their

Let us, therefore,
market value of a

banks.

known

earning figures is that of security profits. The reversal
of the trend of interest rates during the past year has meant that a
more favorable showing in this division of the profit account is likely

result

place.

selected

the operating

year;

National

Northern Trust

banks, they must necessarily count
the value of their shares in the
consider

18.6

-1,150

stockholders weigh

When

TIncludes City Bank Farm-

comparison, Chase Bank reports oper¬
ating earnings after certain charges have been made against them
for bad debt reserves.
Guaranty Trust, on the other hand, reports
net operating earnings before such charges.. While there is no criti¬
*For

Bank

26.2

62.53

CHICAGO:

Value of

223

States Trust

Brooklyn

29.6

■

61.13

National

15. Commercial

31.24

DETROIT:

method of reporting net
operating earnings. The different institutions have seen fit to handle
their reserves for bad debts in various ways.
Some utilize the tax
saving derived from the bad debt reserve to add to valuation accounts.
Others use recoveries or existing unallocated reserves.
Some make
certain charges against earnings. In most cases there is a combina¬
All banks have not

21.

Weighing Market

15.3
35.6

,'.V

114.91

Public

18.

;> 33.3

15%

23.48

'ji

Corn Exchange U—■

19. First

31.3

39%

1,413.26

14.

85%

301.97

13.

.17.

24.7

46.50

Trust

York

United

29.2

471/4

128.58

!•—- —

20.

3.55

Company.

Trust

New

16.

29.3

262

62.79

First National

12.

331/2

370.30

J. P. Morgan-

11.

26.7

38%

-----—

10.

others.

4.83

1.23

ac¬

from

Book Value

55.30

Irving Trust _
9. Bank of Manhattan—

major

Price

47.36

% Discount

6-30-49

Capital

52.86"

Chemical

•

5. Bankers Trust
6. Central Hanover

certain areas,

retail -business,
serving the broad, general public,
have fared better than wholesale
banks with important but rela¬
tively fewer cutomers. The im¬
pact of low interest rates, rising
costs and high taxes has affected
some banks more adversely than
doing

Banks

Market

Stock

Guaranty Trust
4. Manufacturers Trust y~

tivity.

2.37

1.69

changing economic

(Continued on page 32)

In this

of June 30, 1949.

BANK
City,

National

So has the shift by indus¬
try to new centers, as well as the
establishment of new enterprises.

13.17

0.80

3.80

13.52

2.95

3.891 3.43

3.20

J. P. Morgan_._——

factor

2.46

0,33

4.28

Irving Trust

New York

2.42

4.85

—

Guaranty Trust

fNational City

2.15

$2.32
1.87
2.22

$0.76 $0.74 $0.69 $2.26
0.57 0.64 0.54 ,0.60 ,1.69

$0.72 $0.87 $0.80

Trust

National

Chase

1948

1949

1948

1949

—Quarter— >: —Months—
1949
1948
1949 "1948

call

2.'Chase National

20 years, polit¬

others, has been a

slow in

Nine

Third

Second

—Quarter—

„

Common

done better
know
that

cial, have created more prosper-;
ity for some banks and less for
others.
The rate of population

growth,, rapid

PER SHARE

NEW YORK:

OPERATING EARNINGS

*\'r

Book Value of

legislative and so¬

ical, economic,

Banks at
* " ;!

question remains—Why,

are

have
We

first

discount
market
which has prevailed now for some
the

book

■of

banks

Some

let

answering,

Before

'In the years. The table herewith pre¬
values are sents this group of 50 -banks and
usually realizable, often readily three representative bank holding
realizable through merger, sale of companies. Shown therein are the
assets, or even outright liquida¬ book values per share on June
tion.'' Investment
in plant and 30, 1949, the market-prices on
equipment is relatively low. Ob¬ that day, and the percentage dis¬
solescence and wear and tear are count from book value for each
not as important in the case of bank. For purposes of uniformity,
banks. "The book value of a bank; the book value or net worth is
based on the total capital accounts
is not comparable with fhe book!
shown in the printed legal state¬
value of an industrial. Thus, the;
ment published in response to the

purest sense.
than

Liquidating Values

other businesses.

banks,

case

interested
only in their investment;
They3>:
are the owners of the banks in the

•

REPORTED

common

many

ent from

finally, there are the

bank, and

business loans with

share figures are shown for the first
compared with those for the similar

illustrate

generaliza-1

make

ests are at times

demand for busi¬
Government obli¬

df the current year

selling below their intrinsic val¬
ues.
Banking, however, is differ¬

that

individual bank.

obtainable from U. S. Governments and the
the result that operating earn¬
ings were little changed.- v
"
<•'
The following tabulation shows the net operating earnings of those
New York City banks which make such figures available on a quar¬
terly basis. Per

^too

Compared to

Values

Market

Moreover, it
for all the

the lower yields

set by

busi¬
conceded
stocks are

com¬

about $10.6

have an aggregate equity of

It is generally

nesses."

tions for all.

larger volume

.smaller volume of

all

are

individual groups and clas-i
of banks
and their

stockholders to

small extent in other securities. Thus while there
of earning assets available, their effect was off¬

gations and to a
was a

for

there

Obviously,

really

securities of other

the

are

sifications

"deposits from 7^2% to 5%.
million for lending and investing..

those provided by the lower
for the most part invested in U. S.

speak

presume

banks.

demand deposits.
now at 22%.
required on time
These reductions have released about $800

These funds and

by the total V

billion, as indicated

not

United States. Their stockholders

panies in the

by certain

year

to ease

ures

business activity

was accompanied
reflected in a reduction

part of last

capital.

wrw.y;
yvy
^
discuss the stockholders' view of banks. What do stockholders
There are about 14,200 operating commercial banks and trust
•/;'>>".■:-v

■'V■.'■

',V

V-

which began around the latter
deflationary forces.
This
of inventories by retailers and
wholesalers and the liquidation of bank debt on a large scale. Since
the middle of the year there has been a reversal of the loan decline,
due to restocking of supplies and merchandise as well as some sea¬
sonal factors, making for a larger loan volume. Nevertheless, commercial loan totals remain below those for the comparable period of
last,year.
'.v- ■
V'.-.- ./■
Accompanying the decline in business activity and loan volume
lias been the adoption toy the monetary authorities of certain meas¬
The decline in

below
of
by
obtaining

Bank stock expert, in

months of the

first nine

For the

■"V-•.•' ■ :"•* ' '

commenting on current market values of leading bank shares considerably
their estimated book values, cites as reasons for this situation: (1) unfavorable impact on investors
low interest rates, rising operating costs and high income taxes; (2) penalizing of bank stockholder
monetary authorities; and (3) low earning power of banks.
Foresees difficulties in
new

JOHNSON

Week—Bank Stocks

ings as

•

Investment Bankers

Co., Inc.,

President, M. A. Schapiro &
■

This

SCHAPIRO*

By MORRIS A.

•

By H. E.

1949

Thursday, October 27,

FINANCIAL CHRONICLE

COMMERCIAL &

THE

(1658)

71/8

51.4

48.50

23%

51.5

26.29

171/4

34.4

-Volume 170

Number 4850

THE

COMMERCIAL

FINANCIAL

38th Annual Convention of ISA a!

Hollywood, Fla., Dee. 4-9
1949

Annual

(1659)

By R. J. MORFA*

Convention

the

Association

at the

will

held

Chairman

Hollywood Beach Hotel.
Hollywood, Fla., beginning on Sun¬
day, Dec. 4, and ending on
Friday, Dec. 9. Hollywood provides an
unusually satisfactory site for an IBA
convention, and has proved

Contending railroads

operate within

the

Board, Missouri-Kansas-Texas Lines

maze

antiquated Federal and state regulations, executive con¬
subsidizing of competitors to rails in transportation field. Warns
railroad rates to¬
day are dangerously near point where further increases
will tend ta drive
away business. Concludes,
^ Present government
demns government

regulations continue, railroads

The railroad

industry today is in

^brought about by
to

management,* It is

you.

place,
and

the

men

since

can

1 y

the

give

situation

gin nin g
Mark

World War

II,

which
added

has

many

erating
'%■

federal

Raymond J. Morfa

the

not alone in this

are

ex¬

perience, but these items, together
with, taxes, have approximately
(doubled railroad operating ex-,
penses since
1939, and they .are
important factors which must be

Here

are

few

sults of

some

the

taken into account in
ion of the
Joseph T. Johnson

Laurence

who

one

of the

have

were

Association's

attended

among

earlier

most

popular meeting places.

conventions

there

will

recall

they

gone

the most successful and enjoyable in the Association's

history.

other

which

the

freight, rates

Those

that

situa¬

hand,

that

'railroad

time

have

approximately
57%,
figure considerably

below the average increase in the

The final details

of the

convention

program

fully completed and cannot be announced at
will, however, follow the pattern of recent
convention

session

each

Prominent

speakers

will

will be two
of

the

national

morning
address

from

these

this time..'.

The program

There

years.

Monday

sessions.

will

through
In

Friday.

addition, there

three meetings of the Board of
Governors; and most
committees of the Association will hold

meetings
during the convention and wall present their annual
reports at that
time. An open
meeting of the Municipal Securities Committee will be
held on Sunday afternoon. With the
exception of this meeting, and
possibly one or two other committee meetings, it is not
planned to
schedule any business sessions for the
afternoon.
<
The Association's Public Education
Committee will hold
at the hotel
beginning Saturday

Relations Forum
and

Public

morning, Dec. 3,

continuing through Sunday morning.

While this will

not

part of the convention program, members who arrive in
Hollywood
prior to the convention, will be welcome to attend.
REGULAR

TICKET

The Board of Governors will submit to
the convention the Reg¬
Ticket for 1949-50.
This ticket will be voted on at the
final
session on Dec. 9, and will be as follows:

Mark C.

John F.

Vice-Presidents

drive
business to
competing
transportation agencies, and rail¬
road
management realizes
that

further

the

omy

for

the

all

through the Chicago office of the Association.
accompanies

this

bulletin

Hotel rates will be

should
an

Double Rooms (2
persons)
Double Rooms (1

„

;

made

The white form which

for

$16

Parlors

per

day

$24

per

day

$16
$10

per

day
day

per

per person

The hotel will not be
open for guests until the afternoon of FrL
day, Dec. 2. Beginning then, it will be able to
accommodate a limited
number who wish to arrive before
the opening of the convention. Tt
will also be-able to
accommodate a limited number who wish
to stay
over after the
convention. The rates quoted above will

apply for the
period preceding the convention and for 10
days after.
Most of the rooms at the
Hollywood Beach Hotel are double
rooms.
The single rooms are limited in
number and are on
r

the land
side of the hotel. As double
rooms will not be
assigned for si.fgle
occupancy unless it develops at the last minute that there
is unused

(Continued

page

prices

changing

37)'

only

meet

overlooked

taxes

that is all they

the

here

that what¬

truck

industry

pay

for the

of their

rights-of-way, which
highways. A true com¬

the

are

parison

must

over-alt
roads

cost

for.

be., made
borne

with

the

the
rail¬

providing, maintaining

and paying taxes

on their rightsOur- railroads- have anaverage value of $80,000 a mile,

of-way.

high¬

Which
roads.

$5,000
the

was paid, for
by the rail¬
Maintenance costs average^

mile, and

railroads

$1,200

mile

pay
a

top of this:
of
in taxes to»>
average

year

local and state governments. And!

J(Continued

study

page

31)

or as a

be construed

solicitation of

The offer is made
only by

NEW

offering of these securities for sale,

offer to buy,
means

any

or as an

of such securities.

of the Prospectus.

ISSUE
October 21,1949

after

granted to date

the

rates

Commission
months

and1

hearings

Interstate Commerce
and

The

expensive

and

while

Common Stock
(without

many

lag

period

cost

increasing at

Subscription Warrants evidencing the right to subscribe to these Shares at
per share are being issued by the
Company to holders of its outstanding.
Common Stock. Subscription Warrants
\yill expire at 3 P.M., Central Standard
Time, November 3, 1949, as more fully set forth in the
Prospectus.

fact

During the subscription period, the several
underwriters, including the under¬

#that the railroads of
operate within a maze
antiquated Federal and state
regulations covering almost every
nation

signed,

offer and sell shares of Common Stock,
including shares purchased
purchased by them through the exercise of Subscription
Warrants, at
prices not less than the Subscription Price set forth above less

make

These

or to

may

any

a. con¬

trolled rate structure which

tensely rigid.

value)

$31.50

doing
rapid

point I wish to stress here

the

our

par

became

without needed

their

was

the

by the

need

During the
were

Illinois Power
Company

came

Commission,

granted

after? their

in¬

time-

before
fixed

were

iltlffiil: 239,601.IShares

rapidly

conditions.

creased rates

dealers and

is in¬

Stock

handicaps

exceedingly difficult for

concession

greater than the then current
offering price on the New York
Exchange plus an amountequal to Stock Exchange brokerage commissions.
not

them to keep abreast of

changing
conditions, and to promptly and
adequately meet the transporta¬
tion demands of

growing and

our

Copies of the Prospectus

expanding industry.
Inroads of

today
must

circumstances

come

econ¬

from

and

operating procedure, with

this purpose.
American Plan basis as follows:

person)

Single Rooms

used

offer to buy,

as in most
industry, quickly adjust

other

their

Great

convention

have

1 his is under

The railroads cannot,

•j

HOTEL ARRANGEMENTS
rooms

the publicfactor

greater volume of traffic.

The

No fee will be required for wives or
members of the press.
Checks covering
registration fees should be made payable to the
Association and forwarded to the
Chicago office.
It is an established
policy of the Association that only those
who are definitely
eligibile under the By-Laws may attend an annual
convention. It will therefore be
impossible to comply with requests
to take guests to the
convention, other than members of the imme¬
diate family of a
delegate or alternate.
■

for

Will

practice of strict

operation,

business

alternate.

by
are

pays,

re¬

that

they

way

highways.

Use

same

claim

taxes

ever

State-of >Pennsyl¬

ordinary traffic. This

owned

vania showed that roads used
by
heavy trucks cost 16 times more
to maintain than roads
used

pace.

registration fee 6f $40 will be charged for each
delegate and

reservations

relief

from

Arnold, Braun, Bosworth & Company, Toledo,
Elworthy, Elworthy & Co., San Francisco.

the

lines

payment

that

light trucks only. A survey con¬
ducted by the
highway depart¬
of

j The truck

paying their

ways, than for passenger gars and

ment

other

facts, and if these conditions

the

of these

to maintain these

brought to light simi¬

point

relief

CONVENTION REGISTRATION FEE

All

the

near

;

ex¬
..

Pennsyl¬

where further increases will tend

the railroads

Fennelly, Glore, Forgan & Co., Chicago.
Joseph T. Johnson, The Milwaukee
Company, Milwaukee,
Laurence M. Marks, Laurence M. Marks &
Co., New York.

dangerously

apparent.

For President

Albert T. Armitage, Coffin &
Burr, Incorporated, Boston.
For

are

consuming

ular

Hazen S.

prices of commodities of all kinds,
and
the
cost
of
living
index.
Nevertheless, railroad rates today

have not yet been

.enlightening

in other states the situ¬
ation cannot be far different here
in Texas;

surveys: A
study in? the State of California
showed that it cost 22% more to
build highways, for. both
passen¬
ger and heavy truck
traffic, and

55%

considerat¬

overall railroad

tion.

M. Marks

lar

leaders.

concrete

prevail

show

John F. Fennelly

business

states have

state

amples

the highway damage.
Many other studies

actually exists

the

and

missions

costs.

railroads;

form

vania's total traffic,
pay
12% of
the motor fees and gasoline
taxes,
but-cause approximately 90% of

highway com¬
conclusively that
the heavy trucks are
falling far
short of paying their
way on the
highways of our country.
--

op¬

that

discuss in

hope that I

Results of many studies made
by

know -full

well

trailers

clearer picture of

a,
as

that

economists

jrh i 11 i o n s of
d ollars to
railroad

fact

developed that heavy trucks and

this

trucking in¬
dustry is substantially subsidized
is
becoming universally recog¬
nized
by
government ; officials,

Elworthy

you

The

Hazen S. Arnold

having all

the

today.

be¬

beyond the
to explain?
.

without

with

the

tre-

o u s

detail

some

railroads, have

in the main

are

developments that I wish
—i

facts

before" you.
subject that I wish to

the

spiraled

situation

the

material
on

That critical situation has been

—

labor

icosts

of these

some

In the first

headed; for government
ownership.

are

critical situation.

number of progressive developments which

(Control of railroad

Albert T. Armitage

111

The Railroad Picture

The

CHRONICLE

because

the

being

are

rail

traffic

their

regulation

the

matter

establishing rates and in other
operating methods.
know

heard

ment,

ject

qualified to

Corporation

pro

cannot

all
in

recent

and

truck
make

you

con,

have

months
on

subsidies,
a

fair

Blyth & Co., Inc.

Incorporated

Kidder, Peabody & Co.
A. C.

Allyn and Company
Incorporated

the

but

G. H. Walker & Co.

•

Glore, Forgan & Co.
Wertheim & Co.

«...

Harris, Hall & Company

Laurence M. Marks & Co.

{Incorporated)

Bacon, Whipple & Co.

com¬

Company

H. M.

Byllesby and Company
/

The Illinois

Company

Pacific

Company of California

(Incorporated)

The Milwaukee

sub¬
you

"i »

Far well,

Company

address by Mr. Morfa bethe For'' Worth Lumbermen's

Club, Fort Worth, Texas, Oct. 20,

•'

William R. Staats Co.

Chapman & Co.

Newhard, Cook & Co.
Julien Collins &

appraisal of

*An

Robert W. Baird & Co.

Incorporated

William Blair &

read

J. J

1949.

act

Merrill Lynch, Pierce, Fenner & Beane

free

The First Boston
A. G. Becker & Co.

opera¬

tions. These agencies of transpor¬
are also almost
completely

tation

of the several under-

are

made

vigorous activity by
competing agencies of transpor¬
tation,
particularly
the
truck
lines, which enjoy a liberal gov¬
subsidy

any

underwriters

volume

ernment

be obtained from

dealers in securities and in which such
Prospectus may legally be distributed.

Competing Agencies

inroads

may

uriters only in States in which such

B. Hilliard & Son

Hurd, Clegg & Company

Mayn&rd H. Murch & Co.

Company

Kirkpatrick-Pettis Company
The Ohio

Company

THE

(1660)

COMMERCIAL

Thursday, October 27, 1.949

FINANCIAL CHRONICLE
diversification of risk together
from

—

NATIONAL

SE(iURIJI^SEftlES
Prospectus upon request from
your investment dealer, or from

X'C

%•":

.•

stocks involve
some degree of risk taking, Mr. McCabe states:
'I agree that there is a
certain element of risk involved in the ownership of equity shares.
Yet there is little ground in past experience to support the broad
By HENRY HUNT
premise that many permitted bond investments involve less risk than
carefully selected common stock. In general I feel that informed and
flexible investment policy together with sound judgment are much
Assets Reach New High of $1,775,000,000
to be preferred to rigid legal restrictions. The experience of endow¬
Net assets of 87 leading mutual funds reached a new high of
ment funds of educational institutions, as well as of the fire insurance
$1,775,000,000 on Sept. 30, 1949, according to figures compiled by the
industry, which operate under more liberal investment regulations,
National Association of Investment Companies.
has demonstrated that diversified investment in common stocks along
Other statistics recently released by the Association which are of
with other types of securities can produce better than average
"Commenting upon

derived

with the higher income to be

equity shares/

the argument that common

SECURITIES

NATIONAL

CORPORATION

RESEARCH

interest follow:

120 BROADWAY, NEW YORK

5. N. Y.

*lst 9 Mos.

;

Gross Sales

Securities

Nation-Wide

Prospecttues

Investment

Dealers

CALVIN BULLOCK
Establisted 1894

Inquire abou!=

Diversified

Fnnd
A Series

New

udiL

York

descriptive

material available from

your

local

dealer,

from

Company1
INCORPORATED
^ 1 '

Hugh W. Long and

Wall

—22%

tively high rate during the

"The trade publication

Street, New York 5
LOS

CHICAGO

ANCELES

Analyzes Harvard's Investment Policies

'Retailing Daily' sums up the retail trade

A. T. Lyman, Jr., of

inevitable shakeout rather than a genuine slump. And j
although there will undoubtedly be similar shakeouts for television
in the future, no doubt exists in anyone's,mind that the industry'^
road can <mJy 16ad upward.' "—From a bulletin issued by Television

balance between high grade fixed income securities

really

fund in last

"Of considerable interest in this connection are the

comments of

of the Board of Governors of the Fed¬

System, which appeared in a recent report to the Com¬
Banking and Currency of the U. S. Senate. Observing that
there are many potential investors among such people as farmers,
skilled laborers, proprietors of small businesses and professional men
who would like to invest money in common stocks if they knew how

eral Reserve

mittee

investment funds

he called attention to investment trusts as at least a

to go about it.

Treating the matter of obtaining wider public inter¬
est in common stocks as a major problem of the times, he suggested
that one desirable means at hand was through the medium of invest¬

partial solution.
investing their

capital

•

bonds
(Series

ment

"
"
quotations accounts for the percentage
drop in common stocks, since about half of the year's addition to
principal was: invested in equities. In the bond account, however,
striking changes were made.
All long-term U. S. Governments,
amounting to $40,500,000, were sold and $30,500,000 was reinvested in
very short maturities, effecting a reduction of 18% in Government
holdings. The balance of $10 million went into the Other than Gov¬
ernment Bond Account.
This shift was completed between June 30
and Dec. 31, 1948, representing a continuation of a previous policy
of seeking better yields, or equivalent yields and shorter maturities
in high grade oorporates. This policy was first observed in the year

mon

holdings of preferred and com¬
stocks and other securities, and thus can offer the small saver
trusts which have 'diversified

General decline in market

ending June 30, 1948.
DISTRIBUTION OF INVESTMENTS

H'X +//XX'
&

Cash

1929

Common

Real

6.2%

Stocks

New York Stock Exchange

__L—

'Other than U. S.

(Series K.1-K.2)

mUNCTON

Municipal

Tke Keystone Company
of Boston

Mr.

Mohun

will

continue

Public

9.1

42.2

40.1

7.2

4.8

1.6

1.4

1.6

Congress (Street

Boston 9,

.Massachusetts.

Julius

"^prospectus from
your

investment
or

dealer
*.

PHILADELPHIA 2, PA.

the

Schlein,

Exchange,

will

member

Oct. 3L .+>:<

retire (from

..JU~

7.0

industrials:

PORTFOLIO EXCLUDING U. S.
'1932

only

of the Governments, there is
GOVERNMENTS

Value as of Jnne 30th

'1937

'1941

1946

1.7%

1943

1947

.8%

5.6%

19*9

3.5% ^

1.1%

7.5%

8.5%

4.3

2.1

13.2

17.2

5.9

5.0

Utility
——

23.4

14.0

15.9

8.3

31.2

29.7

24.8

16.1

1.6

2.0

2.2

7.7

8.9

8.0

14.9

15.8

55.3

44.6

41.5

22.6

27.9

23.2

24.9

29.0

21.2

31.9

17.4

16.6

19.6

34.7

100%

partnership in Jerome Melniker &
Co.

Non-Government Bond Holdings

37.0

Equip. Trust—
etc.

tlncludes Commercial Paper.

2.0%

—-J.-:

iNon-Governments

'Pe^ent of market

The above

100%

91.0%

95.9%

86.0%

40.3%

29.4%

39.3%

49.3%

total cash and bond

increase

Too%

84.2%

partner in Stern, Lauer & Co.
50

13.9

BOND

—

Industrial,

124.3

9.3

39.9

—-

Railroad

tl8.5

9.4

41.0

tForeign

14.4

10.0

34.7

'1929

bership of B. Albert Stern to G.
Peabody Mohun will be consid¬
ered by the Exchange on Nov. 3.

19.1

11.5

30.7

12.8

changes:

Prospectus may Ims obtained from

42.1

51.7

,/ 8.2

Percentage of Book

firm

Transfer of the Exchange mem¬

1943

24.9%

5.5

Govt. Bonds,

BREAKDOWN

The New York Stock Exchange
has announced the following

1943

28.6%

12.4

Within the bond list, exclusive
major change, the increase in

one

Weekly Firm Changes

common stocks
SI-S2-S5-S4)

1947

34.7%

1946

62.0

Changes in

preferred stocks

6.9%

28.3%

1941

2.2%

25.1

—

Mtges.

1937

BY TYPE

of June 30th

5.5

Stocks

Estate

1932

47.6

'Other Bonds
Preferred

Value as

Market

9.0%

X'
Govts.

tJ.

Cent

Per

B1-B2-B3-B4)

(Series

everyone

Thomas B. McCabe, Chairman

Certificates of Participation in

A research

Governments.

Funds

and common

stock.

report by A. T. Lyman, Jr., of the research staff of
the George Putnam Fund in Boston. Mass„ reveals the shifts in the
Shares Management Co.
1
>,
distribution of investments held by the Harvard University Endow¬
ment Fund during the last decade.
Customers Should Also Be Owners
;
The Harvard portfolio on June 30, 1949, according to the report,
"If more people had an ownership stake in the great American
had a market value of $206,600,000. This was equivalent to 107.7% of
business corporations which have developed the nation's resources
the $191,800,000 book value (cost) of holdings. The average rate of
and which have contributed so importantly to the high standard of
return on book value of investments was 4.31%.
The table below
living which the country enjoys, it seems to us that the political and
shows that the principal shift in type of investments was the decrease
economic
atmosphere in which business functions would be a
in Government bonds, and the increase in bonds other than U. SL
healthier one.
in the country is a customer of American
business concerns. But if considerably more people were also owners
of these same business concerns, the resulting mutuality of interests
would contribute mightily to a stronger, sounder economy. Also, an
important by-product of such a development would be an expanded
source of equity capital which is of such vital importance to a dy¬
namic and expanding economy.
K
;
;
'

Custodian

Fund,

university's endowment
decade. Notes little change in policy of maintaining

distribution and shifts in assets of

traces

"Virtually

Keystone

the research staff of the George Putnam

aspect of television as follows: 'TV's rush toward merchandising
glory has been altogether swifter and more profitable than any other
commercial activity on the record.
Unlike other businesses which
have suffered reversals recently, video's faltering pace this summer
was

Investment

+ 83%

225,503

Stocks, Inc.

other

and

N.Y.S.E

Investment

Prospectus

Research Corp.

recently summed up its outlook for business as follows:
"It is our opinion that business activity will continue

available

from

•

Opinion

Economics Staff of National Securities and

The

$105,716

$192,740
176,775

Shares Traded on

Bullock Fund

—28%

at a rela¬
remainder of this year. For the first half
of 1950, we believe business generally will continue at the approxi¬
mate rate which prevailed in the last half of 1949.
*
000's omitted.
"Increased public confidence and a continuation of genial busi¬
Third quarter gross sales, the best of any quarter in several years, ness activity at this high rate would indicate corporate earnings and
were at an annual rate of nearly $400,000,000,
In this connection, it dividends at a level that could support stock prices generally higher
V
might be well to point out that third quarter sales are normally below than those currently prevailing.
"Variations as to industry and issues will be wider over the
those of the other; three quarters, including as it does the slow sum¬
mer months.
■'+ C
X ,'/■!/'+■ ,■...' ;.i
iC/CX V :> period ahead and, therefore, careful selection is of vital importance.;
; "Ail factors considered, we believe surplus funds should be in¬
The upturn in the market, the increasing interest of member
firms as well as greater appreciation on the part of investment sales¬ vested to take advantage of the relatively high income now available
from many sound securities."
.
;
men of the merits of mutual funds are all contributing factors to the
splendid sales record hung up during the past three months.
:
|
r
The Need for "Living Insurance"
1-+/
The cumulative effect of both direct mail and newspaper adver¬
tising, backed up by aggressive selling, is bearing/more plentiful j
j Americans ar£ the most highly insured people in the world. The
fruit. In this connection, get yourself a copy of the coming Nov. 14 most popular types of insurance make provision for death. However,
issue of "Life." It will contain a two-page ad on mutual funds pre¬ few people can stop working and go on living without being in finan¬
cial distress. Realization of this and a determination on the part of
pared by Arthur Wiesenberger & Co.
*.L * ' j \
the people of this country to correct this economic weakness is shown
Ed Marrow Says:
by the marked increase in "E" Bond purchases and savings deposits.
The future security of the salaried worker and the wage-earner
Money still talks but the interval between saying hello and good¬ ;
cannot be left to chance. Only through careful planning and sticking:
bye seems to be growing shorter, j
......
everlastingly to a savings program can one hope to reach the- goal
of financial security. It is very important that savings be protected
TV Set Shortage
from the dangers present under postwar conditions.
Inflation- can
"Leading manufacturers have returned to an allocation basis of
threaten us for years and small savings need protective safeguards
supplying distributors, in a realistic indication of the heavy demand
against its ravages just as much as, if not more than, the wealth of
for television receivers.
the professionally advised capitalist,<
"The strong sales picture this fall proves the viewpoint of those
To put immediately to work monthly savings of $50 or multiples
industry observers who held the summer sales slump was a seasonal thereof, Eisele & King, Libaire, Stout & Co., 50 Broadway, New York 4,
pattern', similar to that established by radio. A resurgence of demand have inaugurated "RESERVE WEALTH ACCOUNT." Through the
has been accompanied by greater stabilization in prices, after what
use of such an account, anyone can aim for any of a number, of finan¬
one industry leader termed
'an admittedly disturbing readjustment cial objectives, select the desirable medium of a mutual fund for in¬
period.'
vestment and budget his monthly or quarterly surplus, assigning
"At a meeting of the Chicago Television Council, executives of
these monies to the plan or plans he has set out to fulfil.
six major teleset manufacturers forecast a continuation of the current
strong demand lor TV sets, even after the Christmas season. Among
the manufacturers represented were Admiral. Motorola and Zenith.

Net Sales

Dividend Shares

"National's"

+30%

$ 92,787

$ 66,936

Liquidations

% Change

1948

$198,503

$259,676

—

"Brevits."

return."—From Vance, Sanders'

!'lst 9 Mos.

1949

vniue.

tPrimarily Canadian in recent years.

tAs a per cent of,

holdings.

percentage figures are

in total

deceptive because of the large
Utility Bond holdings

non-Government holdings.

^Volume 170

Number 4850

THE

COMMERCIAL,

actually were increased 28%, Equipment
Trusts 59%, and Foreigns
•27%, while Municipals were down but 6% and
Rails down only 1% in
Boo** Value. The
industrials showed

actual 63%

increase

'/%.■/-.

Mr.

shortened drastically.

{

maximum

and one-half years

against only 25% under five years in 1948.
Com¬
Paper, 82% of it in Finance Company
notes, was increasec
from four to $7.9 million.
Another interesting
developments was the
$2,500,600 (150%) increase in serial notes of
Finance Companies with
three
r

equity investment

From the heart

north,
add

huge

-hat

DISTRIBUTION OF

*1329

Railroads

10.3%

tPublic Utilities

30.1

STOCK

*1937

3.2%

U946

1.1%

9.7

tl947

2.4%

10.8

2.3%

1.8%

15.7

18.5

7.5

6.4

7.5

Imbalance

15.1

14.2

3.2

13.9

3.3

3.4

10.7

15.0

10.b

9.9

10.2

76.3

10.0

65.6

56.2

55.1

53.8

54.8

Industrial,
' /

etc.

*Percent

Telepmw

——43.4

Market

Value

Teiegr^yu otocks.

June

30.

tPercent

[;tL '

18.3

Bojk

22.9

Value.

than

his

The industrials showed

Company as
following distribution:

the

INDUSTRIAL COMMON
;

„

(June

„

13.1

Retail

Trade

C-iemical
Food

Fert.

For

4.3

.LiC■ L2L '"Ll-

100.0%

■
•

•

The State Street influence shows
clearly in the Oils where book
value of investments increased
27% although this does not show
up
in the table because last
year's percentages were based on the
1941
bull market in Oils.
Emphasis in
while

stocks

Producers

now

purchases was on crude producers
large refiners were sold, and a third
reduced
dominate. Drug and Medicine

Major increases

were

made

Radiator

$621,000

General

Electric
Owens-Illinois Glass

Kennccott Copper

t",'

''f. }ii

>■

•

■>}'

Oil

V''

Co.

(Indiana )

Fuel

:4-

/■■■XI

rv,

1,047,000

,7-\r

investment

the money
companies. Such

requires

constant

holdings during the

policy,

past

market, industry prospects, and within

readjustments, rather

differences

appear

account

than
for

funda¬
shifts in

any

the

year.

well

were

increased

the shifts

moderately, but in

the

overall

increase

within

the industrial
list, the emphasis con¬
on
the more stable income
producing industries. The fivi
largest groups in the industrials in 1948
remain in the same ordei
in 1949.
;

tinues

The lack of radical
change in the Harvard .portfolio establisher
this fact—successful
management of a conservative fund
for income
purposes rests on the
following

(1)

Balance

common

(2)
common

fundamental principles:

between

high

grade

fixed income

stock.

securities

and

Emphasis on stable income and
growth type industries in
stock
holdings.
.....

(3)

Constant reappraisal of
money market, industry,
pany prospects and
prompt readjustment to

changes

Bache & Co.
Contest
Bache

Employes

ftdvt.

best suggestion

less

fifty words

advertising

promotion.

A prize of
$100
given for the best idea.

The
a

contest

board

Bache,

will

appear.

The

Financial

Chronicle)

BEACH, FLA.Brumbaugh is now asso¬

with

William

Beeken

Courts Adds
(Special

will

judged by
L.

The

Staff

Financial

Chronicle)

COLUMBUS, GA.
Wiegand, Jr. has been
—

the

staff

Courts

First Avenue.

Arnold F.
added

Co.,

1303

contest is Nov. 30. and
lermann of the

Henry Gel-

Advertising

partment, is recipient for all

De¬
sug-

"**

kCJtU,

...

j.»') '
J * V -

''J'?

growth

the

tar, and the

time

With W. V. Raynor

(Special

The

Financial

that

nor

Co.,
ing*

M. Ray¬
is with the Walter V.
Raynor

First
4,<

National
V-

Ai'

Bank

Build¬

-r#v-A

One

than

was

con¬

Larger

the

De¬

fastest

one

growing

the

depressing

one

situation

aspects
is

the

Conservatives,

of them, t
themselves the estab*

for

state.
to

group

overseas

pened

be of

may

you

some

remove

and

the

our

what

see

interes

attentioi

has

hap|
ii|

industry

gas

Britain during the
period of great
achievement in the American in4

pre¬

Back

before

Costs

the

1944, and
Government

June,

Labor

into power, a Committee
of
Enquiry into the gas industry
came

had

occasion,

before

Distribution
I

last

the

week,

Conference

Boston.

was

repeat
about the new

said there

American

gas

frontier, because it is
perfectly applicable to the gas
industry:
,i
so

;

lower

review

the

organization of the

industry.

was

also

advise

changes had become

"The order of events is larger

investment,

annointed

structure and

order to

costs,: larger

*what

(Continued

necessary

develop and cheapen
page

30)

gas

/111 of these shares

having been sold*

this advertisement
appears as a matter

is-

the

dustry.

Investment—Lower

give
k

lishment of the so-called welfar

169; for
wearing

the

name

it functions.

British

least

claim

base period.

war

the

how

old

oj record only.

country's

industries.

Con¬

expenditures this year
in the neighborhood of

Not

New Issue

total in

97,000 Shares

sive, according to the excellent
study of the American Gas Asso¬

ciation, the

sums

of capital needed

American Cyanamid

.is'.

will

be even
greater, or approxi¬
mately
$2,800,000,000.
Inciden¬
tally, -your year book, "Gas Facts,"

one

the most complete

Company

sur¬

Common Stock

of any industry which I have
pleasure of examining.

veys

had

the

vances

to be

easy

optimist

industry of these United
The
technological
ad¬

gas

States.

and

organizing

responsible
progress,

for

plus

the

Price $45.25 per share

abilities

industry's

successful

financ¬

ing involving vast sums of money,
exemplify the type of cooperation
that is characteristic of the Amer
icari economy. It is

Not

New Issue

cooperation by

voluntary action of several fac¬
working together rather than
cooperation imposed from above.

35,000 Shares

tors

The

border

between

regulation

and direction is sometimes
one. No one would

tend

that

the

Anchor

Hocking Glass
Corporation

thin

seriously con¬
gas
industry is

under-regulated. As yet, and as
long as the leaders of the indus¬
try are able to resist
which

regulation
no

fear

any pro¬
transform

would

into
the

direction,
gas

Common Stock

industry's fu¬

ture.
want to

have

linger for

Price $33.50
per

moment

if
b.

the

cooperative phase of the
operations of your industry, in
which respect it is not
exception¬
al, but typical. Corporations that
do a good job are, in
effect, co¬
operatives in every sense of the
word, and they also pay taxes;
service
corporations, es¬
pecially, cannot function in the
pitiless light of publicity indefi¬

Chronicle)

OMAHA, NEB.—Alice

essentially
industry. Your

Public

George

Weiss,

Sam Smith and Adolph
Woolner. The closing date for the

steady

and

Yours

ity less

vested.

around

industry is one of those most
rapidly expanding in point of
physical quantities and funds in¬

posal

PALM

Co., Harvey Building.

sales

comprised of Harold
A. C. Schwartz,

ciated

to what the firm should
do

in the field of
be

(Special

Jack

Co., 36 Wall Street,
New York
City, has inaugurated
a
contest for
employees for the

they

com¬

With Wm. S. Beeksn Co.
WEST

and

now

than

roughly 202; for
189; for gas and electric¬

chemical

Lon| Treasury bonds were shifted to short, high grade corporates; but the balance between
good quality fixed income securities
and common stocks
remained virtually
undisturbed. The sharp cu'
in Bank stocks was
balanced by increases in
Utilities and Insurance

Industrials

that

approaching when the gas indusr
ry will be recognized
(S

1949-1852, inclu¬

s:.'■■;'■'■ ^

readjustment

food,

pipeline security
being offered. Nor is the

the

coke

index

the three years of
1047-49, inclu¬
sive. around
$2,500,000,000. and for
the three years

546,000

484,000

Conclusions
I

seemed

$1,000,000,000, making the

513,000
741,000

y -

Mississippi River

Service

revenues
of
manufactured
ga$
companies from such by-products

will

$702,000

American Co

Public

was

struction

significant than the changes made in the
past
continuity of policies despite the change in man¬

Successful

individual

were:

Wisconsin Electric Power

changing factors in
mental

952,000

is the overall

agement.

North

Coal

•

Power Co

649,000

Perhaps

Pacific

Illinois

564,000

Louisiana Land & Expl. Co.—

Skelly Oil Co

year

Texas

738,000
——759,000

Com¬

what

Glass and Con¬

tainers, Building Materials, and Electrical
Equipment.
The 12 largest additions to
common stocks at cost
American

time

lusiness is unique in

Food and

increased somewhat.

Power

speak

two

holdings were sharply;
longer appear among the larger
groups.
Beverage, Mining and Smelting, Tobacco, and Chemical
holdings were reduced moderately while Retail
Trade stocks were
reduced and

Schram

with

2.0

interested in

manufactured gas business stands
ing still. One must be impressed

2.4

Tobacco

Value.

that

3.0
2.8
___

eagerness of the

the

pre*

long run wnich meets
these specifications best. I
am less

recog¬

society will

vail in the

apparel

sues,

3.1

4.2

Market

—

Total

•Percentages Based

—3.8%

EquipmentFarm Equipment—
Automobile
Soap

5.9

Federal

items

price

ihe index

Emil

whenever one scanned the finan¬
cial pages to observe the new
is¬

Containers

Electrical

12.2

Beverages
Building Supply and Equipment
Mining and Smelting—_——

and

the

That economic

Labor, Bureau of
Labor Statistics, in 1935-39 at
100,

pending

before

all

partment

lines

new

„

sumers'

mission.

Glass

12.6

and

Taking

miles

•ere

STOCKS

30, 1949)

30.6%

new

Miscellaneous

;

additional

-4,6v>0

and

room

tion."

try's economic strength.

for

v)''

Utility Section featured an increase of over
100% in Gas.
stocks, particularly in the field of natural gas
production and trans¬
mission.
Among the electric utilities Holding
Companies are promi¬
nent, led by 48,000 shares of North American

Oil

ap-

ilications

tlnclutic

increase '

way

structure.

output and, finally, lower selling
prices
and
enlarged
consump¬

consumer, you have again epito¬
mized the reason for our coun¬

The

addition.

year

for

nition for
management, and for

earlier

the

reasonable return to the investor.
In connection with costs
to the

the

251,000,

meet

part

labor, for elbow

last

they

community

services at low cost—
for good
wages and opportunities
for development on the

which

total

1.6%

tax

other

essential

were au¬

brought

ftl949 j

and

nitely except as
demands of the-

de-

nsmission

year,
11948

Banks

r a

lines

INVESTMENTS

*1941

2.2%

29.0

have

thorized

COMMON

*1532

effective

3,500 miles of
t

entirely relative, i.e., the amount in-:
groups increased less
rapidly than the total
stock investment.

most

/eloped. Some

each of these

and reiterates

by removing obstructions created by Federal

natural gas
fields, great pipelines are radiating
supply metropolitan centers such as
Chicago. Areas most remote
supply, like New York and the New
England States, are expected soon to

the

vested in

markets

The common stock section
shows a 37% increase in
utilities and
a
sharp reduction in bank holdings. The decline in
rail, insurance,
and industrial
percentages is
common

Stock Exchange

gas

of Texas

west and east

the sources of

irom

Changes in Common Stocks

progress

trend which must be met
head on,

five

mercial

to seven year maturities.

President, New York

Schramm citing

By E1MIL SCHRAM*

industry in U. S. under private operation, points out its
*° lower cosis
ability j
through larger investment. Contrasts
progress of American
try with that of British
privately-owned gas indusunder nationalization. Criticizes
expansion of Reconstruction Finance
tihn as socialistic
Corpora- j!

-1948, bond maturities
In the bond portfolio as a whole
matur¬
ities under five years now
comprise 64.5% against 29% a year earlier
Government bond maturities were
reduced to a

were

'61j,

/••.v,'' /
Shift in Maturities
Continuing the -■ trend evident in June

(1661) : 13

Must Meet Socialist Tiend Head On!

well

large gain relative to the other non-governments.
The increase
industrials was heavily weighted in short-term
Finance Company
obligations. Convertibles were favored in
utility bond purchased
which included $1.6 million of
the A. T. & T. issues of '59
and
a

-FINANCIAL CHRONICLE

■$'
(

New York

Philadelphia
*An address

fore

the

31st

by Mr. Schram be¬
Annual

Convention

of the

American Gas
Association,
Chicago, 111., Oct. 20, 1949.
.

■

The First Boston Corporation

October 25,1949

Boston

Pittsburgh

Cleveland

Chicago

San Francisco

Heads National

By WILLIAM J.
With

national

currency

Canada curiously
which to great
instances

exchange

strict

Canada, with the sole exception of
this country, is better placed than
any other to give forthright ex¬
pression to the principles of ab¬
solute freedom of trade and fi¬
nance.
Canada's vast wealth of

not only
involved
but the'
policy in

virgin natural resources
precludes any great risk
in freeing her economy

Canadian imports; the new

British

the Canadian economy

itself

man

has perforce

lowed

Stires,'

purchases, and the special
arrangement for U. S. dollar pay^ment for Canadian wheat supplied
to the United Kingdom. It would

themselves
relationship to
gold. The American dollar, and,
to this time,
#the Swiss franc, have

V.S

c u

fined

a r

"Vice

Richardson

.dent

Clark

Fund, Inc.,

new

for

Di-f

and

WASHINGTON BELL
Northwestern University

de¬

constructive course

speedily

could

alter

the

policy, has,

moval

RAY

John

the .present

restriction^

Two Secondaries

their continued

was

somewhat surprising, however,

supply of funds for
November
delivery
pro¬
only a fractional decline in

that the heavy

CANADIAN BONDS

early
duced
the

"free"

dollar

market

cially in view of the cessation of
demand on .tourist account. It is

GOVERNMENT;

possible that some of the current
buying of free funds can be at¬

PROVINCIAL

tributed to the unfounded

MUNICIPAL

;

•

eventual action in
this field will be arranged through
the International Monetary Fund

CORPORATION

CANADIAN STOCKS

international scale and the

Royalite

A. E. AMES & CO,
TWO
NEW

WORTH

INCORPORATED

WALL
YORK

4-2400

STREET
5,

NY 1-1045

any

was

share less a
per,

Hocking

sold

share to members of the

this

reason,

Fourth:

city

FRED

lars for

New York

Halsey, Stuart
associates

were

Co. Inc.

awarded

4
i

and

Oct.

$15,780,000 Southern Pacific Co.
equipment trust,' series CC, 2ls%
equipment trust certificates, due

impounding

and

Calgary

Ed¬

mission authorization, at prices

new

the

parities.

California
Economic

for

HASTINGS

HAUHART

University
HOLDSWORTH

THOM

JOHN
The

University

Miami

JONES

MONTFORT

University of Pittsburgh
DONALD L. KEMMERER
The

KIEKHOFER

University of Wisconsin

The

FREDERICK

LEONARD

LEE

of Illinois

University
J.

Illinois

University
WILLIAM

University of Southern California
du

LINCOLN

EDMOND

Wilmington, Del.

Building,

Pont

MAY

WILFRED

Editor,

Financial

Chronicle,"
Leisure,

Donovan.

The

Lumbard and

Newton,

New York City

Irvine,
david

New York City

Mcdonald

roy

Commercial &

"The

Executive
•

Mckinley

State College'

Pennsylvania

PARKER

FRANK

Pennsylvania

University of
CLYDE

PHELPS

University of Southern California
The

University of Texas

REX ROBINSON

LELAND

Washington

University

leaver Street,

City

Michigan

GLENN

Yale

SAXON

University
York

New

WALTER

SHIVELY

CARLTON

The

York

New

RODKEY

University
OLIN

PRESTON

tHOWARD

PRATHER

CHARLES

tCHARLES

"Sun"

SPAHR

York

New

University

TIPPETTS

Mercersburg Academy
JAMES

L*.

TRANT
Slate

Louisiana
RUFUS

Western

United

MAX

Reserve

University

WHITNEY

Procter

Gamble

Co.,

Cincinnati

WINKLER

Bernard,
.

WEISMAN

NATHANIEL

The

University

TUCKER

Westfield,

lion's share

' ; : ■ :
Southern

Emeritus, Southern Methodist

Dean

seizing upon,

by,

Institute

RUSSELL

States

University

Yale

Fifth: Because this
and

WILLIAM

uncondi¬

markets

significant

"
Y.

HARWOOD

HUDSON

£°1CL

Research

tionally in exchange for dollars at
the same rate, makes impossible
the establishment of any really
free

College

GARIS>

American

1934, and

Congress

...

FRASER

University
E.

.V
Tarryton,

FRIEDRiCH
University

ANTON

gold at the parity estab¬

refusing to release gold

Halsey Stuart Group#
Offers Sopac Equips,

policy

Swarthmore

ROY

■

J.
>:■ v.

FICHTNER

Buffalo,
HERBERT

>.■

•

Inc.,

Co.,

Axe

R.. FAIRCHILD
University
•' *

Yale

offering dol¬

the United States in

lished

NASD.

the

University vv

CHARLES

themselves.

among

York

v?v:>v-.
DEMPSEY,

ELLSWORTH

New

Co.,

•

BERNARD

/St/ Louis

stability in terms

Because

Thalmann

Ladenburg,

Glass
$33.50 per
concession of 90 cents

Anchor

The

common

Washington, D. C.
W. CUMBERLAND

States;
WILLIAM

REV.

.''V".rY

■

CRAWFORD
'
v'
• y
Commerce of the United

Chamber

of the
world's monetary gold stocks and
extent of the realignment of the
of current gold production ren¬
Canadian dollar will at least equal
$1,052,000 annually Nov. 1, ' 1950
ders the more difficult such limi¬
that of the U. S. dollar. Stocks
to
1964,
inclusive.
The certi-i
ted redistribution among the cen¬
continued strong led by the golds
ficates, issued under the Phila¬
tral banks of other countries as
and Western oils. There was an delphia plan, were reoffered, sub¬
will permit maintenance of any
especially heavy U. S. demand for ject to Interstate Commerce Com4

rumors

concerning the raising of the U. Sr.

gold price;

espe¬

Kentucky

University- of
ARTHUR

;

„

;
*;

University of Cincinnati
CARPENTER

CECIL C.

placed the Dominion which now impede the free move¬
The
First
Boston
Corp.
of * gold and thereby
limits the
unduly at the mercy of economic ment of U. S. capital and goods
these
so-called
pleted
after the close of the usefulness •» of
events both in this country and in across the northern border would
"hard currencies" in substituting
market, Oct. 24, secondary distri4
Britain. There are now unmis¬ also serve to pave the way for. the
butions of 97,000 shares of Amer-i for gold either as a store of value
takable indications that Canada establishment
on
an
equitably ican
Cyanamid Co. common stock or as a dependable medium of in¬
can no longer rely,on the ability
reciprocal basis of a permanent and 35,000 shares of Anchor4 ternational payments. < •
of either
country to provide a overall U.' S.-Canadian economic
Hocking Glass Corp. common
Third:. Because this latent in¬
happy solution of the Dominion's agreement.
'
\ stock.
security of the American dollar,
future
economic troubles. Even
During the week the external
Offering price on the American stemming from its inconvertibil¬
while iri the throes of her own
section of the bond market was
Cyanamid . stock was $45.25 per ity into gold, robs the world's ex¬
difficulties Britain went to ex¬
firm with trading still on a small
share less a concession of $1 peii changes of the definitely grounded
treme lengths to supply Canada
scale. The internals were slightly
standard
without
which
share to members of the National basic
with U. S. dollars in payment of
weaker
in
sympathy with, the Association of Securities Dealers^ they can establish neither fixed
easier tendency of free funds. It
rates vis-a-vis the dollar, nor, for
Inc.

moreover,

;Y'

CALHOUN

WILBUR

by. the

dependent^ economic

University
v /
j;
CABLE '
• ;<
B. Stetson University

Lehigh

J
^
j
com-!

;

City
- ■
A. BRADFORD

FREDERICK

com¬

Corp. Completes

York

New

•

EOGART

ERNEST

dollar in these days of

\,- l

Del.

Wilmington,

Co.,

confusion in the exchanges and
announced at
turmoil in thq 4world's markets
the same time the election of five
of
Canadian economic new members of its Executive should be promptly reinforced by
mature stage and is moreover in plexion
for / the
period im¬ Committee for three-year terms! genuine convertibility of our cur¬
a
declining trend that calls for prospects
artificial manipulation and strict mediately ahead based on the fol¬ Merrill Grisw-old; Hugh W. Long; rency into gold at the. statutory
rate of $35 an ounce, as provided
'
monetary management. As a re¬ lowing measures:
President
of
Manhattan ■ Bond
in.H.R. 3262. Until dollars can be
sult undue attention
is paid to
(a) Abolition of exchange re¬ Fund, Inc., and New York Stocks;.
into
the state of the exchange reserves; strictions.
;;
t
"
|:i Inc.; James H. Orr, President of freely converted -stable, gold the
establishment of
de-con¬
the level of such reserves tends to
and
(b) Removal of foreign trade Gas Industries Fund, Inc.
trolled and simplified exchanges
become the principal detriment of
restrictions.
t Railway and Light Securities C04.
throughout the world may prove
economic policy. The almost em¬
and Trustee of The Bond Invest-?
(c)
The
establishment of a
insuperably difficult for the .fol¬
barrassingly high level of the
ment Trust of America; Harry I]
single rate of exchange for both
lowing reasons: ~ -" ; ; ' ■ '
Canadian official holdings of gold
Prankard, 2nd, President of Af¬
commercial and. financial trans¬
First: Because increasing mal¬
and U. S. dollars in 1946 was an
filiated Fund, Inc., American Busi¬
actions.
distribution of the world's mone¬
important contributory factor
ness Shares, Inc., and Union Trus4
(d) Devaluation to an easily teed Funds, Inc.; and Edward Pi tary gold is threatened. Stepped
which led to the upward revalua¬
maintainable level, for example
tion of the Canadian dollar at that
Rubin,
President
of
Selected up production of gold,- in South
15% under present circumstances. American Shares, Inc.
time. A decision to take advantage
Ten other Africa and elsewhere, as a result
of this extremely strong situation
In this way a strong stimulas members will remain on the Ex-j of the recent "soft currency" de¬
by the abolition of exchange con¬ would be given to the entry of ecutive Committee until their re¬ valuations, should cause gold to
trols would have been undoubted¬ U. S. investment capital to the
spective terms expire.
.
* . j gravitate* toward the closely
ly a happier alternative course of extent
necessary, to
offset th£
John M. Sheffey continues as guarde'd United States monetary
hoard and toward private hoard¬
action. Similarly the unfortunate deficit on commercial account. Ih
Executive Secretary of the Asso4
consequences
of this hasty re¬ addition,, U. S. interest in the ciation.
! ing in other countries,, the latter
valuation of the currency led to banking field would be encourr
stimulated
-mmrnmrn*—
t
by
depreciation
of
a
severe
drain on the exchange aged as the institution of one ex¬
their currencies.
reserves which in turn provoked
change rate would permit U. S. The First Boston
% Second:
Because the present
the institution of the drastic im¬ banks to participate on an equal
inconvertibility of non-gold dol¬
port
restrictions of November, basis with Canadian banks ih
lars, as well as of non-gold Swiss
1947.
commercial as well as financial
francs, into gold at their official
Failure
to
adopt a bold in¬ exchange transactions.
The re¬
parities, magnifies doubts as to

adopted by countries where
the economy has reached a fully
been

Insurance

Continental

levels.

afforded

bulwark

American

TENNER
r
American Life

CLAUDE

"'.a

Ohio

Oxford

Miami

fluctuating;; "soft curren¬
now
settling at new • and

,The

BENEKE
University,

H.
'

possibly more realistic

Reserve

Western

the

cies"

&
were appointed
of the Adminisf

members
trative Committee.
of action that
The Association
as

There still remains, however, a

-a n

Presi-f

ARBUTHNOT
University

JAMES

preserved,
on
the
fairly constant relation¬
ship with each other, and are af¬
fording fixed points of reference

Stevens

Scudder,

rector

k,
-

Harvard

CHARLES

have

whole,

CORTEZ ABBOTT
University

CHARLES

parities in gold. In this way

they

d d e r i
&

/Stevens

Dorsey

nominally

their

maintained

gen-?

eral partner

SIGNED

definitely fixed

In-)

,vestors Trust;
'and Hardwick

shore

investments.»

and

bzen rapidly fol¬
devaluations in many

currencies which have

Massa4

chusetts

would

lowed the course that

Gris-

international trade

giving flow of

has

18,

Sept,

easing the health-

and

cnanges,

British pound in terms of
American dollars, announced on

Iwold, Chair4

both during

of ^

downward readjustment

nic

,he

Companies, it
is announced!

in this connec¬
tion it is necessary only to men¬
tion the Hyde - Park Agreement,
the abnormally large E.C.A. off¬

following

the

members:

Association of

Merrill

Monetary Policy has
signed by 47 of its

National Committee on
statement which was

Economists'

released

Investment

and since the war;

The

committee

of such a
now
appear
that economic and
also bring about an
political considerations will seri¬
earlier and fuller development of
ously curtail, if not terminate ab¬
this latent economic strength,
v.
further
extraordinary
Recent
Canadian
commercial solutely,
gestures of this kind.
and financial policies have fol¬
prosecution

national trade and investments.

Richardson, Vice-PresiT
of The Lehman
Corp., has again been appointed
Chairman of the Administrative

dent and Director

imports from the
dollar area preclude entirely fur¬
ther efforts in this direction. In a
similar way this country has ren¬
dered extraordinary assistance to
restrictions

,:.y

advocate measure as

the' National

neces-^

the imposition
controls, im¬
port restrictions, and engagement
in long-term bilateral commercial
transactions. On the other hand.
of

Economists' National Committee on Monetary Policy
immediate step toward general restoration of
confidence, stabilization of exchanges and promotion of inter¬

Members of

]

Dorsey

enough has in recent years pursued a general policy
operated in a contrary direction. In most

degree has
stark

dictated

has

sity

McKAY i

freedom of world trade and inter¬
convertibility than almost any other country,

elsewhere

Gold

Companies Group

greater dependence on

Bill Providing for
Convertibility of Dollars at $35 an Ounce

Recommend Passage of Reed

Assn. of Investment

Canadian Securities

1949

Thursday, October 27,'

CHRONICLE

COMMERCIAL & FINANCIAL

THE

(1662)

Winkler

& Co.,

New York City

bar gold in
$1,000.
♦For gold bullion, not gold coin standard.

tAdvocates

conversion

fairly large amounts, e.

into

g.,

Henry W. Hall, Jr. With

2.50%, ac¬ 7 In view of the above consid¬
montons.
*
•:
• > i erations, the undersigned mem¬
(Special to The Financial Chronicle)
bers of the Economists' National
The certificates will be issued
Committee on
Monetary Policy
PORTLAND, ORE. —Henry W.
to provide for the following new
Hadley Hanson to Open
urge, at this time, the passage of
Hall, Jr. has become associated
railroad
equip¬ H.R. 3262 which, by making the
Hadley Hanson will open offices standard-gauge
with Merrill Lynch, Pierce, FenAmerican dollar fully convertible
at 52 Wall Street, New York City,
ment, estimated to cost not less
ner & Beane, Wilcox Building. In
to engage in the investment busi¬ than $23,670,000: 41 Diesel electric into gold, would prove a most ef¬
ness.

was

formerly with Se¬

Merrill-Lynch Firm

yield from 1.20% to
cording to maturity.

locomotives, 760 gondola cars, 650

curity Adjustment Corp. of Brook¬

flat

lyn, Brady & Co. and Cohu & Co.

passenger

cars

and

eight

train cars.

lightweight

-I

fective

toration
of

toward general res-

step
of

confidence,

hoarding^

reduction

stabilization

of ex-

the past he was manager of the
Municipal Department for Holt,
Robbins & Werschkul.

Volume

170

Number 4850

THE

COMMERCIAL

FINANCIAL

CHRONICLE
(1663)'

The Gold Dollar—A Check On

Devaluation and Prices

Government Spending
President, Best

Secretary-Treasurer,

Asserting there

Co.

Renard.

made possible

standard would safeguard human

;

power

government to

liberty for simple

squander

purchasing

power

Lenin said:

}

tiethan

cur¬

rency."

dar

ipmh

time

least

$10 bil¬
lion: and more

and

that

failed.
that

all

The

the

such

efforts

fact should

public

delivered

big

have

faced

has

purse

been

into the hands of
pres¬
both domestic and

appro p r ia-

sure

tions

foreign. This situation cannot be
changed until our money is made

voted

daily. /'

77 At

Philip* Lie Boutillier

was

the

U. S.
cut

War

with

years

deemable
will

frees

was

get

currency

our

re¬

people

irredeemable currency

government

fective

from

ef-

any

control

by,- and responsiIrredeemable
paper
currency. bility to the people, such a
govwas
inaugurated in the U. S. in ernment can
by expansion and
1933 by Roosevelt and
now, four
depreciation
of
the
people's
years
after
World
War
II, the money, reduce and ultimately de¬
gross national debt is over
$256 stroy. the value of their
savings,
billion and rising
again since the their wages, their
profits, their in¬
Administration early this
year so
surance, their pensions;' their an¬
eagerly took again to the deficit
nuities, their
:

„

x-j.,1-

financing road.
The Administration
taxing and
spending policies are fundamen¬

ment

tally wrong *- and, if not
changed, will bring the

ance,

their

■

dollar to ruin,

soon

the

New

ment,
of

York

"Sun" of July: 22 and
it shows
clearly where we are today and

debt

rise harmlessly: to any
figure; that a country may spend
itself into permanent
may

Both

and

these

both

have
with

now
a

prosperity.
imported

ideas

these

are

colossal

blunders

home

come

vengeance.

roost

f In the Congressional Record
Sept. 23,

pp.

13446-13447, from

letter bv Ross
Roy of Detroit in¬
serted

Senator

Michigan:
point

out

have had

few

Ferguson
would
facts

amount

to
not

$44,000,000,000.
be

enough

.,.,."(2)

If
in

owner

home, the

This

money

the Government for

year.

amount to

$30 000,000,000. That's just
enough
to run the Government
for

eight

months.

"(3)

," V7

7;-'/':;^

farmer

every

The
for

livestock,
to

Government
seven

of money.

"(4)
verted

If
its

months

total

not

run

that amount
'

every
net

the

could
on

industry

working

con¬

capital

into cash, the total would
amount
$39,000,000,000. That's hardly

enough
for
f

run

the

This

what

his¬

"The

Power

the

Among the early acts
and

Hitler

under

ment,

many
'

jabout foreign
valuation;

which

substituted

Government

months."

Address bv
Mr.
LeBoutillier
before the Iowa Bankers Associa¬
tion, Des Moines, Iowa, Oct. 18,
1949.
:
v
.

.'JA,:

international

this

knight
be

printed

similar

G. A. Renard

well

Sanskrit.

stories

because

the

price

probably

ancients

had

—

eco¬

days. "-Vr: ;,V' 7
|
s-V

Some

j B ut

alchemists, soothsayers and
jesters,-but their occupa¬

suits

trade

began

tional activities and projects
par¬

Trade.
up

our

chatter.

for
i'..

■,

prices

and;

Two

the

ancient

and

the

making
common

releases

reported

on anyone that

other
a

was

fast

centuries

progress

from

peso

separate

for

are

make

got

are

"economic controls"

economy."

changing

poses

price

rise

fall

nomic

hucksters^,

admit

matter

that

fore the

Purchasing Agents Asso¬
ciation of New York, New York
City, Oct. 18, 1949.

two

the

three

world

things

fact

the

who

steady,

simple

that

reason

power

the

Back

wish to hold
when
you
have

may

in 1933,

■

APMl THIRTIETH

government i to

squander money.
«
The vital things that need to
be
done in the
monetary field now
are
to -maintain
fixity
in
our
,

standard
make

monetary

all

our

unit

and

THE

redeem¬

currency

•

PORT OF
'

able in gold.

•

The

monetary Utopians always
they have discovered a mone¬

say

tary
an

system

easy

and

which

abuses, without

paper

will

remedy for
the

The

provide
mistakes

all
our

having to

remedy

printing of

is always

and

the

only
organization which
has actively and
consistently op¬
posed all these monetary
fakes,
fince 1934, is the Economists' Na¬
tional

Committee

<on

Monetary

Policy (No. 1 Madison Ave., New
York City).
The Gold Standard
League is organized on a State¬
wide basis to aid and
supplement
the work of that committee.
As Esau sold his
birthright to
Jacob for a mess of
pottage so
are

large blocs of

their

and

your

(Continued

voters

selling

inheritance
on

page

35)

(of
;

?•

NEW

YORK

AUTHORITY

•••.:'

•

■■■•*•

or none

;

■

$30,000,000 of The Port of New

•

York

Authority AIR TERMINAL BONDS

of the SECOND
SERIES, Due
1979, (First Installment), will be received by the
Authority at 11:00

A.M.

Wednesday, November 2,

be accompanied

must

amount

money.

The

Proposals for all

there¬

consequences

cdrtifie3

1949, at its
check

$600,000. The Authority will

rejection of bids

the

before 6:00 P.M.

office.

Each

offer

cashier's check in the

announce

the

acceptance

that date.

Copies of the prescribed bidding form, of the Official Statement

Authority and of the resolutions

pursuant

which

bonds

are

of the

these

Authority, 111 Eighth Avenue, New York 11, N,. Y.

to be

issued,

may

be obtained at the office of the Treasurer

THE

PORT OF

NEW

HOWARD

YORK

27, 1949

AUTHORITY

CULLMAN.

CHAIRMAN

October

to
to>

plans.

the situation, fov

(Continued

the

ability
money

•;

when enough cus-7
wise to the mirrors' :

safe¬

for

limits

political !
right aniL:

Cnce, welfare plan, or fhll-em-«
ployment program will fake the ;
stage and distract, our? attention*

paper

liberty

and

course*

America.

standard

and

one

governments

the

situation

have—regardless of

you

financial/

tomers; get
plush curtains being used- irr f
act, perhaps another confer-7

delivery, to meet the currency
Value then in effect. And that as

*An address by Mr; Renard be¬

conditions and

the

time

pur-

the accepted measures of
money,;i
the money itself is a* rubber
yanfc-1
stick.
And recent events prove
j1
that our modern
alchemists;, eeo>* '

dis¬

—

"planned *

r
So long? as 1here is, no
fixed,. •
definite, permanent standard f®c*
dollars, pounds,, etc., which are t

less "custom-

that

who

25%
on
the price
by
sleight-of-hand.
7 :

suit

clause

elastic

1,600, or
four-peck 'bushel
to
three, or*
five, pecks, is as easy as falling •
off a; log. if you can.
up-on-trinv

have

Imagine doing business with

2,000/ pound ton (
2,400; pounds; or a-7

Rumania, and The United States

human

or a

soothsayers claimi the
they have- the
change the value of

escalator

game
it. '

For all practical

that can be managed
by
government, generally to in¬
flate it and
finally to devalue it.
Among the nations today prohib¬
iting the ownership of gold or
gold coins to the
people, are So¬
viet
Russia, Socialistic England,

gold

and

time-, in the development of some¬
thing for nothing. But nature has
always
continued
to.
take
its

this
with

books—depending

money

into

•

nu¬

agreements

cheese

stuck

money

the

under

the

come out of
the hat for special
customers andcertain commodities.

have

man-;,

measuring standards were fbr-':
merly comic or criminal, in our7

foreign transac¬
buying, another for

more or

become

and proper
rules of cur¬

international

and
1 Rubber

shot

and

these

using them, for what; but,^
they -are now accepted in polite
society
as
standard, tools
for

tailored" rates

for

time

one

selling;: and

by turning
gold. Press

into

the

values

tions:

gets, wet,

process

buck

metals
over

tinct

fountain that will spray
old-age

security

Argentine

for

fair, formal

early,

for

variety

Money

reason

management,
to

school

policy.

The

from modern alchemists and wise
men.
The one was the search for

mean

was

currency devaluations. But Senor
Peron hopped in with a
rather
naive
announcement
of

research

the accepted

binding,

export sales; some
present-day highbrows and vote- Canadian prices shot
up
10%,
trappers.
•
•.
1
.
■
roughly
the
• anrfount
of
the

projects have never failed to be
sure-fire attractions;
so, they con¬
tinue to have priority attention

have

rency

merous

few

under

International

British

•

minus to

form of higher mathe^
or the world
to live
'

new

euvers are

through

7:/'v-;:7y!77' ••".

girate

Some

40%

interpret

self-righteous,

hand-is-

off

cannot

■

Rubber
:

their

immediately something
began to happen—: prices

queer

alleled rather closely those of

held

'
•

on the loose with
all kinds
of currencies.
you> know what
yon
are up
against.
■

$4.03, but, after that, it is

trail.

others

only worth $2.80."
And as you
know, a dozen other countries im¬
mediately
followed: along
that

fact,

were

planners, as well
politicians and bureaucrats. Of
Course
they were labeled wise
court

con-

economic

even

notions

nomic and social

men,

that

British

didn't

magic

money

has

just put out a radio announcement
saying: "Until midnight the pound
sterling is worth United States

world
.

■_

quicker-than-the-eye

{something out

j— that

The v boss

any

de¬

currency

any

planner

was

threat of

death, that all gold coin ana
gold be turned in to the
govern¬

suffer

$25 000,000,000.

people

even

same:

and

the

standard

rate.

Constitutional Govern¬

Mussolini, Lenin
requirement,

country sold his farm, farm equip¬
amount

coin

fixed

the

from.

ment.

gold

penalty of fine, imprisonment

this

would

Constitution itself,

prices

the government,
:

purpose, that fountain of
youth
will be just around
the next bend
in- the road:
;
.v

•

one

every
urban
home
this country sold
his

total would

call

guard

"(1) If everyone in the United
States cashed in all of his life in¬
surance policies,
the total would
would

ment

which

our

the

Purse."

The

$45,000,000,000:

run

retains

research department
apropos a Federal budget

obtain
of

the

money

torians

where

we are headed.
The second big gold brick
that
Roosevelt
forced
down i U.
S.
throats in the 1930's was the
Lord
Keynes theory of deficit
spending,
and the idea that the
Government

their self-reiitheir honesty. ;7-7

also

in protection of the
people against
improper powers of the Govern¬

appeared

earn,

incentives,
and

Next to

paper

corporate surpluses,
and
other endow¬

funds, their ability to

their

The best visualization of
U. S.
Government spending that I have
seen

church

worth

of plus,

along.
Again we have soothsayers in
charge of operations and, if
they
cam
really make gold or money

recen t

hull

and

the

over

purse.

Since

approximately $16 billion.

When

regain their control

public

the

the gold standard it

few

groups,

redeemable.

I, the national
$25 billion and,

around

the- end

of World

debt

are

the

'■

company,

the
tinued to march

re-,

course

re¬

o o

has

people'

stop

'■

.-•$

Brow"

been

others, have

this proiligate waste, but they have not
sdcceeded. It" Is'obvious by this

1949

year

/••

Byrd and

hard

decades

its

that

pealed
!

accumulate.

worked

citizens

our

and

sterling

out

anyone to sell you the idea that
some:

individual

There'

the

Rule

Senator

calen-

..—

will

over-turning

allow

camouflage the meaning

"Sweat

vised.

The Federal
for the

y o n a"

not

budget deficit

will

means.

millions

de-

bauch the

o G

AlKthese- hems represent the
people's savings which have taken

society)
to

means

futile without further economic
reforms. Points
a> fixed
convertible medium for

stabilized until

?°nA afT any°ne t0
maybe. And don t allow
matics

once said, "Of all the
contrivances for cheating
the
laboring classes of mankind, none has been more effective
than
that which deludes them
with paper

Purchasing Agents

relationship between percentage of devaluation

predict trend of particular

can

of dollar since 1939.

money."
"There is no
subtler, no surer
the
capitalist

one

National Association of

exchange is adopted.

Daniel Webster

f;.;

Notes decline of 47%

money.

mathematical

tendency^ toward lower prices because
levels.

it limits

reason

warns

commodity price. Foresees, however
overall
consumption cannot keep up with
production at present price
Condemns substitution of
fuzzy theory for tested policy in
monetary matters and holds
cut will be

Chairman, Gold Standard League

Prominent New York merchant attacks
government extravagance
by our present system of inconvertible currency, as
threatening further inflation- Holds restoration of gold convertible

}

By GEORGE A. RENARD*

By PHILIP LeBOUTILLIER *•
New York State

15*

page

31)

.»

mental.. The right to

EWING*
Administrator

Security

Federal

ments of totalitarianism.

thing

By OSCAR R.
I

is left vulnerable to the-blandish¬

than police protection
from physical violence. The right
to life means the right to a job,
since few men can live without

Philosophy of the
;

President Truman's program is achieving purpose of freeing citizens frombaunt^
anxieties over health and economic disaster. Accuses Harding, Coolidge, and Hoover admmistrations of having served financial interests, making inevitable the 1929 collapse.

ing

would

that

help him get a

clothes and then
facto-J job.

of itself;

Mankind entered the 20th Cenhumming,! tury lull of hope for freedom, dethere
would mocracy, abundance. World War I
i

7 were

e s

be high wages

larly

and

Russia

for

with

from

these

wages,

know how to use their
new-won freedom. Having had no

would

labor

faim.
p

the

cumbed to

was a

hilosop h

had

that demanded
Ewing

Oscar

the

that

of. the

fair

reparation debts and inexperience
in
making democracy effective,

benefits

core

Fair

and

philosophy,

the other,

hand, is the import

the individual—the

tance

im¬

portance of you and me and every
man, woman and child. They are
what count—not 150 million peo¬

ple

but 150 million sep¬
individuals, each

as a mass,

arate and distinct

with his own right to life, liberty,

pursuit of happiness. And
are in distress,

and the

individuals

when

di¬
rectly rather-than making them
solely dependent upon the indirect
help that may result from the
prosperity of those above. Recent
history has classic examples of
in

believe

them

contrasting

these

how

helping

saddle

the

and

to escape
responsibility and surrender

and

neaven

The

earth.

new

totalitarian state complete¬

dominates the lives of it£
people. It destroys the existing so¬
cial and; economic structures, it
annihilates all independent groups,
and diverse loyalties. It supresses
ly

what

did Mr, Hoover suggest?

They promised a new

Germans.

country hard. They made the col¬
lapse of 1929 inevitable.
.
cure

caused the Reconstiuction Finance

and intellec¬

Corporation to be formed to lend
government money to the banks,
the railroads, the insurance com¬

political opposition

panies. But for jobless, starving
people—no money, just rugged in¬

ill-pervasive and merciless secre
police makes sure that that powei
emains absolute. The only con¬

The ruling party is
absolute power. Ar.

tual freedom.

invested with

dividualism.
"After Roosevelt"

this

pened

Franklin
New
not

the

after

Roosevelt.

Deal,

hap¬

inauguration

assistance

given

was

only to those at the top—the

banks, the railroads and the in¬
surance

companies—but direct aid

also

was

group
were

given

other
in need of help. Programs
enacted for direct help to
every

farmers, to debt-burdened home¬
owners, to
to
all the

unemployed youth and
other

victims

the

business collapse.

Nothing shows better the
trast

between

the

con¬

philosophy of

apathy.

our

was

the

you

and

will

Dives.

remember,

beggar who

crawled

and ate the crumbs that fell from

the

table

the

rich

Dives.

man

Now, our opponents' way of help¬

ing Lazarus would be to pile

aisturbed

an
entire
completely col.apse,
leaving
millions jobless,
starving, hopeless. This was fol¬

have

Americans

Dives' table to that

crumbs would fall to the floor for

Lazarus

pick

and

eat.

the Fair Deal way, the
Roosevelt-Truman way, would be
contrast,
to

help Lazarus directly

as a man

to clean up, to put on some

decent

■"'A speech by Mr. Ewing before
the 18th Annual New York "Her¬

ald

Tribune"

Forum,

New

City, Oct. 24, 1949.

York

seen

economic structure

lowed 'by

war

robbed

homes,

our

that disrupted
young

our

people of the best years of theii
lives and left us victorious ovei
totalitarian

one

Many

ng.

less menac-

of us are full

of ap¬

Whai

and^anxietiea.
hold?

What, about

What would happen i

job?

strikes

serious

illness

family?

Can my children
education?
Can
I

decent

enough for
If

but

aggressor

faced with another no

food

has

servant

our

toil

to have no un¬
anxieties but
They interpret the

seem

who

Fair
a

Deal
better

people. Those of
in the arena

daily

practical

perfection

any

the

the state

make

also

politics know that
will never come, but
that, out of these

know

the

Western

around

drawn

NSTA Notes

7'•

Freedomy'!

free

position and criticism of the gov¬
ernment of the day?
"(2) Have the people the right
government of which

to turn out a

they disapprove, and are consti¬
tutional means provided by which
they

make their will apparent?

can

"(3)

Are

there

Earl

John W. Bunn

courts of jus¬

Edward Senturia

Hagensieker

violence by the
Executive and free of all threats
from

free

tice

associa¬

and all

of mob violence

particular political

with any

tion

parties?
"(4) Will these courts adminis¬
ter open

which

and well-established laws
associated in the human

are

mind with the broad

principles of

decency and justice?

for
for rich, for pri¬

"(5) Will there be fair play

well

poor

vate

persons

well

govern¬

ment officials?

get a
save

respectable old age?
society is to win the

battle for men's hearts

and souls,

state, be maintained
and exalted?

the

today, largely as

people are deeply
with jtiuaeiifcs.
Wt

prehensions

Lazarus

•

programs

serted

own

does tomorrow

own.

developed,

seeks

"(6) Will the rights of the in¬

depression and the

result of the

war,

parable

have

dividual, subject to his duties to

We know that

the Fair Deal anc( the philosophy
of our opponents than the Bible

Lazarus,

freedom that our ancestors and we

industrial in¬

•

into

iwed

the

Under

their

They

Fair Deal would perfect

Within the framework of every

help

The masses are
terrified political

he ruling group.

what

with

lems.

take place withir

gests for power

Contrast

it.

fHe opponents of the Fair Deal
to comprehend today's prob¬

New

Truman

right

men's faith in democ¬
workable way of. life.
Deal restored it.
The

.What is this freedom

fheir

The

And when the break came,

the

Fair Deal is designed to

wanted

they

:isions,

traders were
they rode the

and

money-getters

means

eties of an end in the poorhouse.

education,

will

comes,

Churchill's Teste of

else to make their de-

ed someone

Harding,

stability.

man.

want¬

despair, the masses

In their

from

economic

life

The

The right to
to security

abundant living.

the ring
freedom that centuries of strug¬

gle

individuality to some mas¬
Coolidge and Hoover served the sive, external authority. Lenin and
Stalin seemed to be the answei
financial interests with utmost fi¬
for the Russians and Hitler for the
delity. The emphasis was on prof¬
and

racy

philosophies work.

its

destroyed

* that the
strength¬
not only relief from their burdens
en? Fortunately, the tests of free¬
but conquest of the world.
And dom have been phrased.in- words SECURITY TRADERS CLUB OF ST. LOUIS
they eagerly embraced totalitarian of classic grandeur by-: Winston
The Security Traders Club of St. Louis has installed the follow¬
Churchill, who y. is /certainly- u& ing new officers:
The capture of both the Russian
flaming radical. I will read"
and German people by the totalitests; and as I read them, i ask
tarians was made possible by the
you to apply them to eac|j- ahd.
confusions and anxietieSo that be¬
every item of the Fair DeaT^proset them. Their problems seemed
gram and you will see that the
insoluble.
Whichever way they
program is completely within the
turned was bafflement and bewilframework of our cherished free¬
terment.
Their economies were doms. Here are Churchill's words:
destroyed, their religions were
"(1) Is there the right to free
challenged, there seemed no hope
expression of opinion and of op¬

political

The administrations of

Fair Deal will strengthen

they succumbed to the deceptive
talk of one who promised them

of the New

Deal

The heart and

happiness
education

j since ignorance is to the enemy

derstanding of

the victims of

arid

With a

the same pattern.

pursuit
to

right

that men cannot
for starvation

competence.
These- great

war-shattered economy, enormous

would trickle down to those below.
Deal

tyranny far more

_Tne seduction of the Ger¬
people took longer but it fol¬

lowed

nomic structure in the expectation

and

give slightest effort toward social daily struggles, slow and painful
every boy and girl equal educa¬
change as the hot breath of revo¬
progress is being made and that
tional opportunities so that none lution.
They do not realize that
the Fair Deal philosophy is lead¬
will, except of their own accord, a free society must offer positive
remain the slaves of ignorance answers to the haunting
ing us upward to a better America.

which they
escaped—totalitarian commu¬

man

the

despairing

and

it new confidence in itselfThese
opponents had well-nigh

fail

aid

these

meet

gave

means

to work

Federal

pay.

when

nism.

prosperity for
h
f
financial
top of the eco¬
"

interests

a new

broken

laws put a floor

wage

forced

terrible than that from

and more

decent shelter to
of our people. Our

under wages so

experience with democratic politi¬
cal machinery, they quickly suc¬

buy the prod¬
ucts

not

did

give

minimum

Germany.

that

will

particu¬

people of Russia, released
the thralldom of the Czars,

The

and

for labor;

dreams,

those

shattered

left

laws

The New Deal

land that its opponents had

took

the

hope to provide protec¬ jwhen the body is too worn to
tion from the catastrophe of sick¬ iwork further, since life is hollow
ness
and disease.
Our housing when it is surrounded by the anxi¬
ance,

automatically

health is fundamental
full life.
The right to life

and

understood if it is first contrasted with the political
philosophy of its opponents. Alexander Hamilton is, even today, the spiritual leader of the
Republican Party. It was his belief that if only business were prosperous, everything else
care

right

continue

needs of our time.

life
right to good health,
The

will

and

philosophy can best be

take^

Despite the opposition, the New
Deal and the Fair Deal have met

since good

means

—-

Fair Deal

livelihood.

Security bead asserts
•

that beset modern man or else he

happiness are equally funda¬
life is some¬

The

Thursday, October 27, 1949

COMMERCIAL & FINANCIAL CHRONICLE

THE

(1664)

"(7)

and as¬

earning a living by
striving to bring
up his family, free from the fear
that some grim police organiza¬
tion under the control of a single
toil

tap him on the shoulder and pack
him off without fair or open trial
to

■

and

oarty, like the Gestapo, started by
the Nazi and'Fascist parties, will

bondage or ill-treatment?"
;
Fair Deal answer to each

questions

times yes. But these
questions and their answers have
another value.' They enable you
is yes—seven

judge the rubbish handed out

those who

statism

and

Third Vice-President: Edward Oldendorph,
Secretary: Kenneth Kerr, A. G. Edwards &
Treasurer: David S. Matthew, White & Co.
National Committeemen are

The Nashville

Newhard, Cook
& Co.; Charles W. Hahn,

Richard H. Walsh,

Jerome F. Tegeler, Dempsey-Tegeler
Scherck, Richter Co., and John W. Bunn.

NASHVILLE SECURITY

Smith, Moore & Co.
Sons,

TRADERS ASSOCIATION

Security Traders Association

have elected the fol¬

lowing officers for 1950, to be installed Jan. 1:
V
President: Fred K. Kirtland, Hermitage Securities Company.
Vice-President: Martin B. Key, J. C. Bradford & Company.
>
&

Secretary-Treasurer:. Edward L.
Kirkpatrick.

Kirkpatrick, Clark, Landstreet

.."

•

talk scornfully of

the

welfare

state as

though the Fair Deal would de¬
stroy our freedom.
The fundamental purpose of the
Fair Deal is to set men free, to
free them from

John W. Bunn, Stifel,

& Co.;

The

of Mr. Churchill's seven

Nicolaus & Co., Inc.
First Vice-President:
Earl Hagensieker, Reinholdt & Gardner.
Second Vice-President: Edward Senturia. Newhard, Cook & Co.

President:

workman,

daily

David S. Matthew

Kenneth Kerr

Edward Oldendorph

Is the ordinary farmer or

haunting anxieties

RECUPERATING
Clarence E. Taylor,

Taylor

Co.,

Inc.,

Vice-President of Strader,

Lynchburg,

Va.,

was

of mind, stricken with a heart attack while attending the
from the apprehensions and jmxi- to fulfill the promise of the Decla ¬
National Security Traders Association Conven¬
ration of Independence which de¬
eties that lead men to surrender
Their freedom for the phantom clares that man has certain in¬ tion and is recuperating at the Glockman-Penrose
promises of totalitarianism.
The alienable rights, among which are
Hospital, Colorado Springs, Colo., where he will
Fair Deal is doing this by furnish¬
Life, Liberty and the pursuit of
ing certain minimum hasic securi¬ Happiness., Our opponents talk remain for another month. He would be glad to
ties. Our social security laws pro¬ mostly to the right of liberty
have his friends drop him a line at the hospital.
vide minimum protection against
generally their own liberty—and
seem to forget that the
the hazards of old age and unem¬
right of
ployment. Through health insur¬ life and the right to the pursuit
it

must,

furnish

some

surcease

tha

destroy their peace

Clarence E.

Taylor

Volume 170

Number 4850

7 Gulf Oil Research
Head of
.1

COMMERCIAL

Costly But Worth While

laboratory of the Gulf Oil and Refining
Harmarville, Pa., reveals value of research
despite

its

increasingl^heavy

Gulf

fining Com¬
pany.. ■
"-''V'
"When I first

(1665)

By STAHRL EDMUNDS*

Economist, Northwestern National Life Insurance
Co.,

expense.

Minneapolis, Minn.

After stressing
importance of capital formation to economic
welfare, insurance economist points out:
(1) there has always been a

capital is due

to less

personal and

•

.•

search twen- ;

ty-two
a g o,"

years

i-.

rem

nisced

Dr.;

Foote, imm.e-Y:
dlately aft e r£
the
the

Leo

employee

the

1948.

Re¬

Harmarville, Pa.t 20 miles

are

east

savings

own

research director—

originate ideas;

inspire; to

to
accomplish this it was
necessary to have intimate contact
with the
laboratory and with the
technical personnel.
"I recall how

happy

continued Dr. Foote

"Of

ter

three

the

"when

could

and

time almost

1948.

the development
gasoline,
at
that

technical,

laboratory curiosity

graduate,

and some twelve years later
to the Army and

preparation.

Occa¬

soon may

comparable

many

lines

deavor.

sole

"Research costs money, and all
of us in industrial
research have
learned to determine how much

Dr. Foote in 1927 came from the
XJ. S. Bureau of
Standards, to Gulf
to head a Mellon Institute Fellow¬

geophysical
department, tha\
naturally began with research anc
development and followed through

costs

curacy

with

especially

two decades.

study
on

considerable
over

But some

ac¬

the last

searching

time ought to be made
the cost of not doing research.'
some

with actual field operations when
its equipment and

considered
about

cleus

techniques

the

housed

organization,

the

new

Leovy Laboratory,
"But

alon g

change
planned

were

ready for use. It
ago that the

was

years

came

was

nu¬

now

$1,500,000
assembled

Miss. IBA

the

nominated for Chairman of

Mississippi Valley

new

the Investment

America.

over

Group

The

Group

Bankers Asso¬

economy system was en¬

forced

requiring increased help
especially
of
a
non-technica
nature, in the laboratories ana
everywhere else.
,f "A modern industrial

ciation to

•

■'

Creely,

suc¬

director is

Gold¬

labor

auditor,

patent

relations
and

expert,

legal

coun¬

Capital,
tangible
therefore

Vice

man;

selors, business manager, and the

One

result

this

maze

management activity is increased
cost

research,
increased

similar

curred in every

costs

course

have

Oc¬

than

one-half

the

It seems
fhat these tremendous
capital resources in the
United States
me

monumental

tribute to the

only

are

the

capital

re¬

sources
of
the United
States
great magnitude
compared to the
other countries of the
world, bu

they

are

pared

large indeed

very

those

Only 100

our

own
past
production in

years ago

United

com¬

States

arose

almos

and

domestic

animals.
In
of the work
energy

being

energy

applied

of it is being
and power. If

multiplied

and

supplanted

will

&
Co.,
ecretary-

vivid
in

progress

opment.

John H. Crago

Treasurer.

The

for

the Executive Committee

are:

human

energy

evidence of the
industrial devel¬

our

Y'v X.'<-57->

application

re¬

Street, Pittsburgh.

From there it

moved

to
Harmarville in April
1935, with the real expansion of
the research department starting
years

earlier.

Today, Gulf
Development, a sub¬
Gulf Oil Corporation,

sidiary of
1,027 employees at Harmar¬

has

years.

Edwards & Sons; Joseph A.
Glynn,
Blewer, Heitner & Glynn; Arthur
H. Christophel, Reinholdt &
Gardner; W. Paul Harper, Boatmen's

application

tantamount

Americans have

^W^;Sandethde° officers00' ^Hbeen
is

Nov.

to I

taken

capita

*An

energy
over

posssible

the decades

plowing back from
address

Mississippi Valley before the 44th
Group's election meeting will be of
the American

held

has

8oods' valued at near'y $400 bl1
lion at 1929 prices, to make this

National Bank; G. Gordon
Meeks,

Nomination
election.
The

Mr. Edmunds
Annual Meeting

Life Convention

I Chicago, 111., Oct.
7, 1949.

least1

tions

the

; I

think

the

may

depression

conviction

the

enlarging
the

In order to
analyze the possible
I would
like to make
some

vestments.

the

past

and

savings and in¬
apologize if some of

deep

these

assertions

most

but

ever-

sound

dogmatic,

not

have time to deal
fully with their factual basis.

(1) There has
always been a
inter¬ shortage of equity capithl. There
is some
tendency to regard the
V."' fV.

seriously

is,

strongly

maintain

motivated

amount of

and

The

as a

drying

up of

of common

financing issues

are

growing,

the government has
found it necessary to foster
basic
research in the
physical sciences.

shortage

stock

a great
fountain of venture funds
which flowed
freely in the golden
age of the 1920's.
When the re¬

It is

being spent

money
is
large

present

then

its rate of economic
growth.
also well
equipped to do so.

especially

about

the

rupted again. Y;.;'
The
United
States

research

background

comments

present nature of

group, that
economic
progress

not

alternatives for the future

employee

rate

Continue?.

minds

Americans, especially in

should

Surrounding this

safely said
left

Will Capital Formation
Growth

question of who shall
initiate the'
necessary savings and investment
I think there is
great uncertainty.

hardly be overemphasized.

removed

stock

from

flotations

the

figures of

the

period

in the future.
It is entirely
possible that the average rate of

1926-29, the volume of new moneyraised by common stock
was
fairly
modest.
A study
by the Federal
Reserve Bank of
Minneapolis in¬
dicates that the securities
market
is a small factor in

increase

and

anything the rate of technolog¬
change is likely to be stepped

ical
up

productivity may be
4% per year instead of the
which has prevailed in the

past.
I

not

naively

assume

accepted the idea that
their standard of
living is tied up

productivity

capital

think
the

the

to the

formation.

process

fact

publicized doctrines of

labor

movement

ignore this

point.

generally

depression

would not/
a

therefore, bring about
public clamor to increase capi¬
formation in order to restore

nevertheless,
labor

and

tions

that
in

men

apparent,

who

one

reads

government
publica¬
the leaders and idea-

government

and

unions

are
at least
privately aware of
the tie-up between
capital forma¬
tion and the standard of
am

satisfied

therefore, that
employment or
would

see

leaders,

living,
mind,
large drop in

my
a

own

personal

government

well

every

means

income

and

labor

businessmen,
at

hand

stimulate and increase capital for-

matiqn in order to maintain
ress

some

new

per¬

sonal

savings of the entrepreneur,
family, and friends plus the
that plowing back of earnings to ex¬

sciously

financing

growing enterprise; the prin¬
cipal sources of funds are the
his

the public or rank and file
mem¬
bers of labor unions have con¬

using
by

rate of
growth; the main question is who
shall initiate the
savings and in-'
vestment to make the
capital for¬
mation possible.

and political situa¬
United
States can

living standards.
energy

production is the process of mech¬

E. H.

First,

savings,

pand

prog¬

living standards.
True,
limited depressions in capi-

the

business.

The

want to make is that
the
of equity

capital

great

point

shortage

itself

not

because that is

concern,

nothing new. The disproportion¬
ately large amount of debt-seek¬
ing capital in relation to
equity

capital is however of
that

fairly

ment.

;.i

(2) The

tal

X'YV

double

question about the
future;-,
then, is not whether capital for-1
mation will continue its

logical, social

the

world's

manufacturing capacity.

average more than 4%
per
This would mean that
the*'
value of capital
goods in Am ericayear.

The

The importance of this rate
of
economic progress in the
psycho¬

•

search department when it moved
into
a
new
building on Kraft

Research

reflect

phase of American

had about 60 employees in its

two

the process

substantial.

may

by fuels
will think of the most backbreaking labor which you have
done, then this illustration of how
mechanical energy has

Jones,

Named

goods,

the rate of

will

secondly, the rate of progress
in capital formation and
standard
living has been continuous and

Hegemann, G. H. Walker & Co.; anization.
It reflects the
degree
Andrew S. Mills,
^
Newhard, Cook of capital formation in
the past
& Co.; W.
Guy Redman, A. G.
November, 1929, Gulf
100

business,"
Back

and

results

innate or moral
qualities of
people.
The United
States, with
7% of the world's
population, has

Jones

like.

said

supplied

Chair¬

Edward

per year and

increase in net capital
formation

y-\Y

goods

you-

and Ed¬

ward D.

than 2%

two main ideas to be

are

upon

that

though
productive

been true in the

would; probably

investment, and capital formation.

that

production, and 93%

Tegeler & Co.,

expert,

in the future.

work

eler,Dempsey-

as:

order
more

was supplied
by fuels and power
Today there is 28 times as much

Jerome F. Teg-

poor, worried fellow
He is surrounded by a
battery of

their

food, clothing, and shelr

And

properly
to forego

self-restraint

consumption

saving may produce

are:

extracurricular specialists such

A budget controller, vice president
in charge of
questionnaires, tax

takes

labor

ent

the task of doing the
job. It takes
honesty to do the task

1850 only 6%

man, Sachs &
Co.
Other

nominees

goods,' beyond

than has

«-

■/. '
i * I take it
therefore, as fact that
the rate of increase in
productiv-'
ity in the future will be more

depend¬

has
closely

job which needs to be done.
It takes
industry to labor through

the

research

and

available

gathered from these facts.
the standard of
living is

therefore,

solely from the energy of human

ceed Walter J.

There

Not

LOUIS, MO. — John H.
Crago, Smith, Moore & Co., has
been

The process

character of the American
people

ST.

about 1933,

are

Grago Named to

aspects,

Some

college
of en¬

well>

past.

increases

Significance of Capital Formation

tied up with the
character and
m0ral fiber of the
people. Capital
formation takes initiative to
think

be doing work

that

Navy at the rate
of half a million barrels a
day to
win the war for democracy."

ship on Production Research. His
plans included the organization of

many

difficult

very

facilities

capital formation,

the

i.e.,

sionally, promising high school
graduates, who are certainly non-

educational

ex¬

"Back in 1933, for example, we

working

employee

per

found

wcrkers

and

technical and non-tech]
nical
employees.
Certainly the
differentiation cannot be based on

perimenting

100-octane

two

times this amount,

have

laboratory and actually work

were

between

into classify

right along with the scientists
technicians while they were

such

in the rate of economic
prog¬
in the centuries
prior to 1850.

ness

ress

lot of hard labor by a
group of

but:

can
pay - a
return on their cost. Then
it takes

the cost per technical

course

$6,000

than 40 main buildings are de¬
voted to many phases of petroleum

research,

productive

severe

are

have

and'

occur;

every 20 years.
Such a rate of
ter, has almost tripled.. This is a
capital formation
obviously neces¬
truly remarkable accomplishment sitates
large savings and invest-1
when one reflects
upon-the slow¬ ment in the future.

•

nav

verted from the
laboratory to the
payrolls of the service units.

tract

reasons:

for

needs for

are assessed

lahoratorv* to
laboratory to

employee

57-acre

in¬
(a)

capital

against I
,h
on
pay for tnese | vestment judgment is likewise estor these!
services, and (b) manpower is di-! sential to determine y additional
thf

through one of the chemical lab¬
oratories in the Gulf research cen¬
whose

materially

two

operating costs

was,
he strolled

families

spend
Stahrl Edmunds

tory

for

may

rate of
in these factors will be*
and the
interruptions less

faster

wage earn¬

But it also takes
manage¬
ment vision to see the
need for

employee

in¬
4 per

;v.

benefits

productivity

ing

nance

creased

has
2%

apparent. Per
capita real income has multiplied
four-fold since 1850. The
propor¬
tion of incomes which

the_J

of cap¬

ital

timated cost per research, labora¬

genius;

and

The

productivity,

progress

means

...'r

years.,;"

•

to infuse and diffuse
the investigational
spirit; to nur¬
ture the germ of inventive

talYtaamation,

that the output
worker has doubled every 35

oer

services such*.as
format
steam, heat,,
etc., are furnished on a fee basis ll.Q> d
by the company plant, which may' since — w
s
also handle the
payrolls, the es¬ savings to fi¬

then the primary

were

new-

vvXv Ittripg'-standards

continuous cribwhole I believe the

productivity

anaverage

This

year.

re¬

as,

capital formation has

that-

aeen

garded
source

rapid

creased

are

sometimes

enlighten;

and

completely self- '
contained institution
operating our Monetary
a

into;

S 0 o.d s. a n Q.
s e r v *c e s-

buildings, grounds,: sewage
Pittsburgh, "I was an academic
type of fellow and enjoyed work¬ disposal, etc., and hence employ a
ing in the laboratory with the large .force of unskilled labor. <If
a
laboratory occupies rented space
physicists and chemists..

15% of their income
productive facilities.
The result of * this

to .p r oduce.
C phsumable.

oecause

"These

ment whifch
is .later used'

research laboratories

furnished by

Dr. Paul D. Foote

search Center,"
at

functions of

"Our present figure of
$6,000 is
low compared to the data
usually

tangible plant
and

Laboratory of
Geophysics
Gulf's

every

year

includes

department, not just the scientists
and technicians) against
$6,000 a

recenil,

dedication

shortage of equity capital; (2)
disproportionately large amount of debt
more institutional
savings; (3) institutional investment is more
than personal
rigid
investment; and (4) future formation of capital will be attended
ville,' and some 600 field em¬
by greater risks. Fore¬
sees as future
ployees ■, at work in oil
financing alternatives: (1) specific action to stimulate
fields!
equity capital; (2) permitting
hroughout the world. But to refinancing institutions to convert part of assets for
equity purposes; or (3) having government
urn to Dr. Foote:
provide
77;Y;Y
equity capital.,
Y
:V.*
^ ^ ^ toPic ^is morning relates to
objectives in the financing of capital formation in*
Foote, "have more than doubled the United States over the
long-term future. In discussing capital
since 1933. In that
formation, we are not'
year they were talking
directly about money nor monetary
around $2,700 a
savings. Capital formation is rather the process
year (that figure of
creating
*

Re¬

engaged in industrial re-<:

FINANCIAL CHRONICLE

PITTSBURGH, PA.—The changing character of the duties of
industrial research director were
an|
discussed here by Dr. Paul D.
Foote, |
Executive Vice-President and Director of
Research, Gulf Research!
& Development
Company, and Vice-President of Gulf Oil Corporation
and

Trends of Capital Formation

research

new

Corporation

THE

concern

recent

;Y:'

and

develop¬
'

disproportionately large

amount of

debt-seeking capital in
today has come about
because savings have become less
existence

personal
ized.

and

institutional¬

I believe Donald Woodward

made

this

point

conclusively

Financial Section meeting here

about two
not

years

ago,

and I need

belabor the point further.

(3)

Institutional

investment

rigid than personal invest¬

ment.

This

is true

reason

the fact that the institution is
gov¬
erned by investment laws whereas

the individual is free to take his

(Continued

page

20)

(O'S"

COMMERCIAL ' & FINANCIAL

THE

(1666)

'•

»_

'' _'V

ff f

News aLbout Banks
'

CONSOLIDATIONS
NEW

•

BRANCHES

NEW OFFICERS,

Bankers

and

ETC.

i'i. CAPITALIZATIONS
i

was

Trust Co. of New

announced that Max¬

has

York,

retary,

„

having, been
«'bank's

of the

member

Vice-President. Mr. Kalb
with the bank since 1924,

-has been

capital

The enlarged

Sept. 30.

made effective

in the surplus of
the Haddonfield National Bank of
Haddonfield, N. J., from $130,000
to $200,000 has been authorized
by the directors, making it equal

formerly Assistant Sec¬
has been appointed an

well Kalb,

Assistant

stock.

new

President,of

Harvey D. Gibson,
Manufacturers

Twenty-Five Year Club on

the

increase

capital.. Announcement

Bank

1933.

since

responsibilities r ta younger
The Peoples National
recently increased its outstanding
capital stock from $1,500,000 to

shoulders."

#,000,000 through the declaration
of

15,

stock

dividend of $1,000,000
the stockhold¬

and the issuance to

buy, another

rights

ers

$500,000 of stock. This operation
has been approved by the stock¬
holders.

enlarging the
referred to in these

Plans for

capital were
columns
N:

Sept. 1, page 875.
V'

Bank
increased its

National

Wash.,

Seattle,

University

The

capital effective Oct. 1 from $500,000 to $600,000 b,y a stock divi¬
dend of

Oct.

this representing
5-for-l stock split.
The stock¬

from $100 to $20;

1949. He was made an this, said the Philadelphia "In¬
Rollin
O.
Bishop,
who was
Assistant Secretary in 1944. -Mr. quirer" of Oct. 17 was made by
elected President of the American
R.
E, Townsend, Vice-President
Kalb is a member of the Con¬
National Bank of St. Paul, Minn.,
The bank has un¬
sultative and Policy Committee of and Cashier.
on Oct. 17, assumed his new post
divided profits of $63,000. •
the Personal Loan department as
on Oct. 18.
Mr. Bishop had been
y,
* ■■■■'! • f.V-irv:«f V
well as a member of the Research
Vice-President and director since
-and Planning Committee.
\ John
Kean, President of" the June, 1948, it is made known in
•
ft
v?
National State Bank of Elizabeth, the Minneapolis "Star" of Oct. 18.
-•!
',.v
V-"
".The eighth annual dinner of the N. J., died on Oct. 23 at the age of As President, he succeeds C. R.
60. He was also President of the Clarke, resigned.
vt■
Quarter Century Club of the Bank
+.
*
of The
Manhattan Co. of New Elizabethtown ' Consolidated" Gas
Co. and several other utility com¬
York was held at the Waldorfi Through a stock dividend* of
Astoria Hotel on Oct. 19. Of the panies. He was a son of the late
Hamilton Fish Kean who /served $250,000,. the, National" Bank of
325 members who attended, 39 had'<
asUhited—States Senator from Waterloo, "at Waterloo, Iowa,' in¬
completed their 25 years of serv¬
creased its capital, effective Oct. 5,
New1 Jersey;
ice with the bank during the past
'Oct.

1949

the

Baltimore cisco, in the; administrative de¬
National Bank of Baltimore, Md., partment, was announced on Sept.
22 by President L. M. Gianini. To
at the monthly
meeting of the
2' by President L. M. Giannini. To
directors on Oct. 14, according to
borg - relinquished the office of
advices in the Baltimore "Sun"
Vice-President of Stanford Uni¬
by J. S. Armstrong, Financial Edi¬
versity, it is learned from the San
tor.
At the same time Carl G.
Francisco "Chronicle."
He was
Linke
was
named an Assistant
formerly General Manager of the
Cashier.
Mr. Mueller, who has
San Francisco Chamber of Com¬
been with the bank
sincej 1933,
became an
Assistant Cashier in merce, and had also been with the
California State Chamber of Com¬
,1945, and in 1947 was made As¬
merce for sorne years,
sistant Vice-President.
Mr. Rob¬
/■j,:■
inson's association with the bank
i At a special meeting on Oct. 11,
dates from 1937. After serving as
an
Assistant Cashier he became the stockholders of the Bank of
an
Assistant Vice-President
in California National Association of
1947.
Mr. Linke has been asso¬ San Francisco approved plans to
ciated with the Baltimore National reduce the par value of the stock
Vice-Presidents of the

Thursday, October 27,

CHRONICLE

$100,000, according to the
bulletin of the Office of

Comptroller of the Currency.

the

voted to withdraw
the stock from listing on the San
Francisco Stock Exchange.
The

also

holders

Deposits of Mutual
Savings Banks Show !

in our Sept. 15

plans were noted
issue, page 1060.

»•-*<

•'"

Anthony Grace, President
rof the club, presided. . Lawrence
C... Marshall,
President of , the
year.

Ij'bank, presented

membership cer¬

tificates and gold badges to the

from

President to succeed

the late

members. Graham

Vice-Chairman of the

*■

•

♦

meeting of the

board of

directors

The

Industrial

Trust

Philadelphia this week

■

$500,000,' the
oft the

of J. Benjamin
of Trust Officer
National Bank of At¬

; The promotion
Moore to the post
of the First

Ga.,

lanta,

Oct.

made known on
R. Clyde Williarrts,

was

time
announced that F. E. Newborn,
former Trust Officer, has been
elected
Cashier.
Mr. Newborn,
President, who at the

says

same

the Atlanta "Constitution,"
instructor in the Atlanta

Chapter of the

American Institute

the Citizens
Savings Bank of
Los Angeles, CaL, announced on
Oct. 18 the
election of Stewart
McKee as a member of the board;:

Guaranty
Co. and a

Lincoln

Savings Bank

of Brook¬

regular monthly
elected J. Frank Bau-

lyn, N. Y., at its

meeting

Vice-President. Mr. Bau-

mann

has had many years of ex?

in the field of invest¬
is a graduate of the
American
Institute
of Banking
and the Rutgers Graduate School
perience

ments:

Banking.

Savings

Co.,

The

■

capital of the New London

City National

Bank of New Lon¬

}

Conn.,

the

increase

having

befen

brought about by a stock increase
of $150,000, while the additional

$100,000 resulted from

the sale of

Dyste,

;

$19,082,000,000

readh a total of

V:,/..;

.A'/

estate

Oct. 1,Hen¬

King¬
Presi¬
dent, National
ry

/■

man,

Association of

-'48

Mutual,

Assistant Trust

department
Co. of

Savr

ings; B a n k s,
and President,,

real
of the Califor¬

Manager of the

Officer and

Farmers

and

Mechanics
Angeles,
Savings Bank,
Calif., has completed his 20th year
Minneapolis,
of service with the company. Mr.
reported Oct.
Dyste started his bank career at
26. As in eveAda, Minnesota, in 1917 and held
?ry month this
positions in Huron, South Dakota
tr yea r, except
banks
before joining " the trust
February, the
company's staff: in
September,
Henry S. Kingman
gain exceeded
1929. He is a member of the Los
that
for .the,,
Angeles Realty Board, National
Association of Real Estate Boards; corresponding . month
last year.
and the Institute of Real Estate The
September, 1948, gain was

nia^ Trust

Los

;

Treasurer of the Life Management. •
i'
. J $45,000,000. -f ' - .' '
Insurance and Trust Council and v.'V'Zi-V- ;'v vV-.
*
*
Deposit gains for the first nine
a
member of the Committee on
:
Stanley H. Makelim has been months of 1949 of $682,000,000 ex- '
Trust Affairs of the Georgia Bank¬
pairied Auditor of the United ceeded the rise of $641,000,000 for
ers
Association. He entered the
States National Bank of Portland, the full year 1948. For the nine- '
First National in 1924 as office
Oregon, it is announced by E. C. month period the gain was 3.7%
boy and has served in various
Sammons, President. Mr. Makelim this
year
in contrast to 2.9% "
capacities, having been Auditor entered the banking field with the
($513,000,000) last year. The in-•
before-k hec;oming;. Trusty Officer, old Ladd & Tilton Bank in 1922.,He
crease
reflects both:-a
gain in
from .iyhich he qow advances jto
continued: with the United Stater, amounts deposited in regular ac¬
Cashier.Mr.; Moore also served
National dwhen
that, institution counts this year and a drop in the
as office boy when he entered the
purchased the Ladd & Tilton in sums withdrawn.
bank
in "> 1927,
and
gradually 1925. He was named Assistant
The net gain of $90,000,000 in
worked up to the post of Assistant
Auditor in January of this year.
mortgage loans in September was
Trust Officer, which he relinquish¬
As Auditor he succeeds L. E. Peathe greatest for any month this
es to become Trust Officer.
body who died in September. Mr.
*
*
♦
T
year and brought the gain for the
Makelim
is
a
member of the
first nine months of 1949 to $591,American
Institute
of Banking
The Oak Cliff Bank & Trust Co.
000,000. The corresponding gain
and Vice-President of the Port¬
of Dallas, Texas, has named three
in 1948 was $464,000,000.
During
land'Conference of the National
members of its staff to the posts
September holdings of corporate
Association of Bank Auditors and
of Vice-Presidents, namely: J. O.
and municipal securities also rose
Hutchison, Proctor M. Boyd and Comptrollers. Three other person¬
$10,000,000 and cash $9,000,000, but
W. Otto Frosch, according to an nel changes in the bank were an¬
the portfolio of U. S. governments
announcement by President R. D. nounced by Mr. Sammons. Charles

of Banking,

was

Bank

Man¬

Grande,

the
has

branch

the
K.

become

Manager

Monmouth branch replacing
Kirk acting manager since

July when the United
tional
tional

States Na¬

purchased the First Na¬
Bank of Monmouth. David

at the
Othena, Ore., branch, has been
appointed Manager of the Athena
operation, replacing F. S. LeGrow,
retired.
At the Corvallis branch

declined $43,000,000.

Ore.,

ager

Crain, Assistant Manager

Claude

Hough

has

been

ap¬

pointed an Assistant Manager,
s'v!i!
#'V

Chi. Stock Brokers

Associates Elect
CHICAGO,

ILL. —The

annual

the Stock
Brokers'
Associates
of Chicago
was held for Oct. 19, and the fol¬
election

officers of

lowing were elected for

the com¬

ing year:
i":

President—William H. Higgins,

Paine, Webber, Jackson
r

& Curtis,

Vice-President—John E. Little,

Paul H. Davis & Co.

Two changes in the official fam¬
f Secretary—Bernard J. Cunning¬
ily of the Peoples National Bank ham, Goodbody & Co.
of Washington at Seattle, Wash.,
1
Treasurer — Thomas
A. Kavawere
announced in a statement
naugh, Paul H. Davis & Co.
released Oct. 12 by Joshua Green
.

Dallas, Texas, as
Vice-President, it is learned from
tional

Estabrooks, an Assistant

Industrial Trust Co.
Rock the Dallas "Times-Herald" of Oct.
Mr. Mancill, formerly ViceTrust Co. was consolidated with 16.
Sr., Chairman of the board of di¬
Industrial and, as a result, Indus¬ President of the Dallas National
Financial Managem't Corp.
rectors of the bank. P. A. Strack,
his new
post
trial acquired its present branch Bank,'1 assumed
since 1943 President of the bank, {.
SEATTLE, WASH. —Financial
/>'
at Broad Street and Nedro Ave¬ Oct. 17.
Corp. - has
been
•»-/
■{•
«
*
v*
■"*:
; becomes Chairman of the Execu¬ Management
nue.
In 1930,. Industrial under¬
tive Committee and Joshua Green formed with offices in the Insur¬
Effective Sept. 29, the Colorado
took the liquidation of the North¬
Jr., Executive Vice-President, be- ance Building to engage in the
east Title & Trust Co., and paid Springs National Bank of Colorado
comes President.
Both are now securities business. Officers are:
that institution's deposits in full. Springs, Colo., increased its capi¬
members of the board of directors.
John E. Tribke, President; H. E.
from ' $150,000
to
$180,000
Later that year it purchased the tal
In
announcing
these
advance¬
assets
of
the
Textile
National through the-sale rof $30,000 of
Benson, Secretary-Treasurer. Mr.,
ments Joshua Green Sr. said: "The
"■ rBank and thus acquired its pres¬ new stock;
*
*
*
recent. increase
in : the capital Tribke was formerly connected
; t
'
ent Kensington Avenue arid Hunt¬
structure of our bank has brought with Conrad,1 Bruce
Co. 'and
The appointment of Louis B.
ingdon Street offieeym:
f v
[
about: sharply increased duties and conducted ' his
d^n " investment
Lundborg asrVioe^President of the
j'*
•
' "V-* * *>..
burdens iwhich have resulted in
firm of J. E. Tribke & Co.
Nicholas F. Mueller and George Bank of Amerifca National Trust
the necessity of shifting some of
D. F. Robinson, Jr., were elected & Savings Association, San Fran¬

changed
in 1929.

The same year Fern

•

has been increased
irora $250,000 to $500,000, a part
don,

-t

ITEM r

48 BANK

*•

During September deposits of
531 mutual savings banks of
the nation
increased $57,000,000

the

is President of the
Union Life Insurance
director of the Menasco

Manufacturing Co.

Title

Continued Rise

McKee

Mr.

Trust

directors

The

;

National Trust &

Co. of
celebrated
Co. of
the 60th anniversary of its found¬
Joseph J. Bosco and William F. ing and the 50th anniversary of
Siebert were made Assistant Trust the association of its President,
Officers of the company.
J.- Edward Schneider,
with the
*
«
*
bank.
Mr. Schneider joined the
Wilton C. Donn, retired ViSce- Industrial Trust on Oct. 30, 1899;
Suddarth.
This gives the bank
President of the Brooklyn Trust as its sixth employee when the
Vice-Presidents,
it was
bank was located in the rear of seven
Co. of Brooklyn, N. Y., died on
noted in the Dallas "Times-Herald"
Oct. 16. After serving for a time the building adjoining its present
of Oct.
12—the four others al¬
with the Fourth National Bank of main office, 1944 No. Front Street.
ready holding these posts being
New York, Mr. Donn entered the The bank was then known as In¬
A. B. Moore, T. Y. Hill, James C.
Mechanics Bank of Brooklyn as dustrial Trust Title & Savings Co.
and had
deposits of $1,700,000. Dycus and Robert M. Gibson. Mr.
head bookkeeper, becoming evenIri 1919, Mr. Schneider was elected Hutchison has been with the bank
j'^tually Cashier; when that bank
and
Treasurer,
and for 20 years, Mr. Boyd for 18
was
merged with the Brooklyn Secretary
years, while Mr. Frosch, formerly
Trust in 1929 he was elected a Vice-President-Treasurer in 1923.
with the National City Bank of
Vice-President, according to the With deposits at $10,000,000, Mr!
Schneider was made Industrial's Dallas, had since the first of the
Brooklyn "Eagle," which adds that
Today year been Cashier of the Empire
he held that post until his retire¬ fourth President in 1927.
State Bank of Dallas.
ment in 1947. He had also served the trust company has three of¬
fices, more than $22,000,000 in de¬
fte Treasurer of the Bankers' Club.
J. Neal Mancill has become as¬
posits and 25,000 depositors. The
bank's original name, Industrial sociated with the Republic Na¬
■:
The Board of Trustees of the
a

the Lawyers' Trust
New York, held Oct. 18,

the' Comptroller
On Oct. 19, the directors of. The
Trenton Banking Co. of Trenton, Currency reports.
■: ■^Ks
3NV J; elected- Sydney- G. Stevens

B. Blaine, Caleb S. Green. / The announce¬
bank, pre-1 ment was made by;'Godfrey W.
seated additional awards to the Schroth,' Chairman of the Exec¬
utive Committee of the
board.
members celebrating their 30th,
Since'Nov.:, 1, 1948, Mr. Stevens
35th, 40th and 45th anniversaries.
has
served as Executive VicePeter Goelz of the bank's Jamaica
President of the'bank. Prior to
office, was elected President for
that he was an Assistant Vicethe coming year.
President of the Bank of The Man¬
tiy
*
ft •/'■' '■ ft
hattan Co., New York, which has
i-y.f William L. DeBost, Chairman of
been a correspondent bank of the
I the board of the Union Dime SaVlocal institution for more than 140
ings Bank of New York,; has an¬
years.
Mr. Stevens started his
nounced that on Jan. 1, next, Wal—
banking career with the Commer¬
ter R.
Williams, Jr., . Executive
cial National Bank and Trust Co.
Secretary of the Savings Banks
of New York in 1933. In 1937, he
Association of the State of New
was elected Assistant Trust Officer
i! York, will become associated with
and in June, 1946, became Trust
the bank in the capacity of TreasOfficer.
Several months later he
;.t urer/ Mr. Williams graduated from
began his association with; the
/
Yale University in 1932, at which
iBank of The Manhattan Co. as As¬
f
time; he! joined the. staff :of the!
sistant Vice-President in the trust
;! JFrankHn Savings Bank.
In 1942
department.. During World War II,
he resigned his position of AssistMr. Stevens served in the finance
ant Secretary in that bank to acdivision of the Armed Forces. He
eept his present position in the retired from active service with
;
Association.
/
'
•
the rank of Major.
new

$250,000

Office of

'■/

Volume 170- -Number 4850

THE

COMMERCIAL

FINANCIAL CHRONICLE

Preservation of Free Enterprise

30 times that of conventional

By HARRY W. BESSE*

ma¬

profits, the
prise is Tost.

chines. A moth

repelling coating
for closet walls may be
applied
in a relatively
permanent fprm
by a paint brusn. Photostats in

Decisive to Our Future
;

41667)

With

of) Air

Force, defense of our free
enterprise system is as vital to future welfare as
military defense. Cites dependence for materiel on a
American corporate enterprises and reveals
large participation of people in ownership of corporate enter¬
prises. Extols profit motive as element of national
progress.
men

Amazing? Not at all, for another
paragraph announced that one of
largest steel companies is re¬
ported to be spending $10,000,000
this year on * research. The re¬
search
of

of free

prise is
cisive

future
and

tories

de¬

The

yYy.

■

.,:£■''/''YYYY:1

of national defense

Y by the

are

the

American

investment

pand

the

ever

profession

capital

"required- to

by
in¬

create

worker's job with
merchandising
ventures is apt to be lower while
electric power and

light corpora¬
requirements
are
much,

tion's
much

higher.
Subscription

stock

ture

purchase

enterprises

attractive

buyer has

this

reasonable

delay.

places

maintain
where

active

securities

market
may

bought and sold. So that

one

nation

have

may

from

cast

covetous

Unwilling,

great land.

our

unable, to emulate

truly, rejecting both the

tical and

ever

work
of

present fact of hard

the

and

inspirational force
liberty, Old World

personal

thinking always tends to gravitate
contemplation of the use of
force against us.

Not to take back with them
freedom of speech and
to

transplant to their home¬

lands the

privilege of the ballot--

not to learn and

apply the Ameri¬
whereby each suc¬
er i c a n generation

formula

can

means

of producing better

altogether,

risk

enterprise). So
that it may be
reduced, the Ex¬
changes require of the corpora¬
tions for whose shares
they pro¬
vide

trading privileges, that full
publicity be given to earnings,
asset

values

and

other

data

quired for analysis. So that

re¬

mem¬

ber firms may be
properly armed
with sufficient
capital the Ex¬

changes
to

conduct

assure

frequent audits
compliance with its
adequate capital posi¬
a

rules

for

tion.

So that the

investors' buy¬
orders may be

ing and selling
equitably handled, the Exchanges
have surrounded themselves
with
a code of
professional ethics un¬

surpassed in any other profession.
The typical gigantic
corporate
enterprises of our modern life are
truly of the people, by the people

our

worship—

not

passes

essence

f6r

No.

the

and

and not the

treasures

the

ways

people.

material

wealth

political and spiritual

they would capture

for

Too

with

often

have

been

Mr.

the

Besse

Graduating exercises, Head¬
Flying Training Com¬
mand U. S. Air
Force, Barksdale
Field, La., Sept. 30, 1949.
quarters

see

mem¬

the corporate form
even

that

years

have

Everett's

elapsed,

corporations

since

address, production
has

our

world

opportunity
and
system of free public education
can
provide, doing our jobs when
must with the golden ideals of
Americanism in our
we

hearts, while

our

hands

are

thousands-fold, but

he alive

were

today that great American would
again assign to free competition
operating now as in his own era,
the prominence that it merits in

building on the Western Hemis¬
phere the highest standard of liv¬
ing in all the civilized world.
Profit—Motive of Progress

machines

any

other

nation

man.

the

■

have

the

through the

shining

crusaders.

years worn

armor of
The
great

only

altruistic

incentive

Cold War.

•

Now, Cold War, in its connota¬
tion, has an interesting parallel in
the struggle that American free
enterprise has been required to
make from its
very

would

fought, destroyed forever,
leaving on our broad continent a
police
state
followed
by
regi¬
mentation,

slavery,

chaos

death.

and
'

Without the prospect of

must

never

catastrophe to

permit

■

this

occur.

New York, Chicago & St. Louis

•

One of the features of the

,,y ;

recent more buoyant rail market has

been the sustained strength in the stocks of New
York, Chicago & St.
Action of the
stocks, and particularly the common which is

Louis.

selling well above its 1936 high, has again brought to the fore the
question of a possible stock recapitalization to eliminate dividend
on the 6%
preferred stock. These arrears have been reduced
in the past year and a half
by payments of extras of $3.00 a share in
1948 and $7.50 a share earlier this
year.

Until

They still amounted to $73.50.

they are paid off, either in cash or through a stock recapitaliza¬
tion, the common obviously can not participate directly in current
high earnings.,' YY.Y.Y-Y'Y
yY,r Y;. ;--Y
''..;Y:
VY
■

There have been attempts in the past to eliminate

peake & Ohio
which would

automatically have eliminated the

they were offered blocked this
plan. Subsequently, Chesapeake & Ohio disposed of its
holdings of
Nickel Plate common,
distributing it as a dividend on its own stock.
Next, plans were discussed for an internal stock recapitalization of
Nickel Plate with a simultaneous
merger with the controlled Wheel¬
ing & Lake Erie. This idea was dropped when it became obvious that
large holders of Nickel Plate common would not accept any dilution
-

It was when the last mentioned

and

tive

been,

of personal

hope always will be,
profit.

mo¬

dowed

with

freedom

We have been

from

permitted to direct

energies to the material

man

our

that such

com¬

families. No thinking

advance

can

fear.

the

development

proposition

without

various

forms

as we

have

confidence

invest¬

private

ment for the nation's

without reliance

the

savings, and

the continued

stability of tije system which has
made it all possible.
Now

let

not

misunder¬
enter¬

the

tive

reached

desk

further

evidence df.its crea¬
capacity. News thaKpur natu¬

ral gas pipeline system
is^o reach
251,000 miles this fall..That re¬
frigerated air express makek pos¬

sible

the

flowers

sale

beginning. The. in

new

HawaiianXcut

mainland

stores.,
A

department

plan that

satisfactory to preferred stockholders

ice

machine freezes

continuous block at

rate of

any

the dividends have been further
"

common

and at the

stock.

same

time

It is not considered

such proposal will be feasible until

substantially reduced through addi¬

Nickel Plate has long been accepted

as one

of the sound railroads

in the country.

In the past its troubles stemmed largely from recur¬
ring maturity problems in connection with which the
company was

forced from time to time to request
bondholders to extend their ma¬
These maturity problems and the desire of the
management
to get its overall debt structure down to a
more conservative level

turities.

were
largely responsible for the long preferred dividend drought.
Also, the company needed cash for. an ambitious property program

and

these

purchase outstanding stocks of Wheeling & Lake Erie.
All
are now in the past and cash needs from here on should

things

be much

modest.

Nickel Plate is virtually all main line. It
enjoys a relatively long
haul on the bulk of its traffic. It does little
passenger or 1. c. 1. freight
business. In the east its lines extend
only as far as Buffalo where a
large volume of traffic is interchanged with Delaware, Lackawanna

& Western and Lehigh
Valley. It is not itself saddled with the
heavy terminal costs of the eastern seaboard. All of these factors

contribute to

high degree of operating efficiency. Earning power
high. Earnings on the common over the
averaged $17.87 a share and last year they amounted

under normal conditions is

past 10

years

to $39.09.
The

basic

status

of the company

be further

and its earning

power

should

substantially improved shortly. Lease of the Wheeling &
large majority of whose stock is already held by Nickel
Plate, has been approved by the Interstate Commerce Commission.
Lake

Erie,

It is expected that the lease will be

finally consummated by Dec. 1,

1949.

Had this lease been in effect last
year

Plate

common

have

abandoned that the

accumulations

would be

news

was

on the program of
whittling away at the divi¬
with extra cash distributions.
Obviously this
slow process if the entire arrears were to be
so handled.
Efforts have been continued, therefore, to devise some new

dend

tional cash payments.

We have always been a restless
people, aspiring and energetic, en¬

scheme

management embarked

would

likely in many quarters that

has

exchange of stock
Opposition

arrears.

of preferred stockholders to the
terms

products at

lower cost

this problem

The first proposal was for a
merger with Chesa¬
where there would have been an

would not involve dilution of the

there

Regensberg

but pages in history, the
for which these battles

were

oi\ ad¬

which drove them to create better

prise I submit to-you, not in its
defense, but rather in its praise.
And
why not? Only yesterday

•

j
j

conclusion

stood, this prosepective of

history

affected—withering

deprived
of
its
Without good wages and

of their equity. \

that I present to you the
proposi¬
tion that our nation's industrialists

the magnificent

born of our own
inge¬
nuity, unequaled in efficiency and
scientific capabality by those of

and

become

freedom

of back dividends.

expanded

gain,

by the best

unbounded

Rabaul

profit would

Mr.

and manned
of

emo¬

readily in¬
recognition.

arrears

attained could have been realized
without an incentive of personal

the

address

spontaneous
regular representa¬
which, as in ordi¬

then, and has become

forts for

this

to us by
the. security of
our homes won at
Saratoga, in the
Argonne Forest, at Midway and
Leyte Gulf, and in the skies over

truly now, the custom of our
country. In the more than 100

our

faced

was

the

phenomenon not to
guard against it by setting up de¬
fensive force, splendidly
equipped

.♦An

So,

destroy.

passed

parent government.

and

things

Our system of defense stands
people. In this cate¬
today as the important factor in
gory is General Motors —a good
that strange international relation¬
example to use. Their great plants,
ship that is sometimes referred to
and

the

rather

Now, do not draw
Must Defend Material Wealth

ceeding

the

to the

their facilities with risk re¬
duced to the minimum
(it cannot
be eliminated

use

prac¬

liberties

forefathers,

our

vancement the workers'
coopera¬
tion
with
management
dis¬
appears.

services

in¬

are

the will and the voice of its
bers.
;
' •

the

the democracy that has served

time

The

possibility

choice

the

disunity, the future

would indeed be clouded.

pro¬

animal

the

with

republican institu¬

nary civil corporations, the affairs
of the
community are decided

powers

eyes

which

tive system by

reason

the

beganr foreign

material wealth of

of Stock Exchanges

Here lies the great
responsibil¬
ity of the Stock Exchanges.

They

our

why,

was

adoption of

corners

of the world. There is little

assurance

that his shares are marketable.
That is to say that he can convert
them
into
cash
without

Hesponsibility

device

story, gilded by

retelling, has spread to all
wonder

our

was

The American

our

na¬

only when the

matter

the
trade

new

tions of government—nor

everyday lives—it is
not casually regarded in
other
quarters.

$6,-

over

without

divided

weakened by

and

refinement of learned

debted for

Over

accepted

was

statesmen

This corporate development has
provided lavishly the goods and

ma¬

000 for each person
employed
the corporation. The

vestment

them

than 1/10 of 1% of the total shares

services

business

with the establishment of consti¬

ex¬

fact in

precious

tutional.freedom in this country.

outstanding.

plant,
of

shares.

without

similarly

oxygen.

less

some

our

the great train of events connected

124,000
owned 25 shares or
less, with no
single
individual owning
more

millions is clear when it is
pointed out that du Pont has capi¬

investments

and

without

England,

plantation.
This, said Mr. Everett, ought to be
considered as a leading incident in

sim¬

industry

the

would

for

government,

people
objectives

pro¬

distinguished
Armed
Forces,

though born of noble

fear

—

with

com¬

the

and

were

granted

the Y pursuit
of

pertinent

100 shares.

being
stockholders, holding IVz

million

many

tal

Fewer than 8%

110,000

woman

chinery and materials

branches

over

even

corporations which had for their

objective

less.

charters

for

Gallantry
service

corporate institutions in

which
made

mendations, decorations,

colonies

likened

motions.

nullify its fin¬
'

American

founded

are

cross-

owners,

productive

nation

real

time these figures were
compiled,
General Electric had over 246,000

cor¬

machinery
keep up with
increasing consumption. How

the

they

are a

with stockholders in
every state in the Union. At the

corporate

plays its important part.
Millions are required
of

stockholders

General Electric presents

enterprises stand today as a crea¬
tive force powered
by the savings
of our
thrifty people. It is here
that

been

Production

the

ilar picture,

simplified

industrial empire, operated in
form.

visionaries
down

had

Hill, pointed out that nearly all of

pace

vibrant, dynamic American

porate

vision

spired

own

mechanical and technical
Most supply problems

our

progress.

social

tear

could

military force

cation of the monument at Bunker

10 shares

greater importance in

with

infiltration

tions,

everyday America. Of
this great number 34% own btit

Harry W. Besse

material '

ever

and

would

emasculate it

after year, to

year

from

In 1828 Edward
Everett, when
delivering his address at the dedi¬

section

attained

political
who

work

commonly called,

war.

Logistics
have

actual

itself

est capabilities.

ers,

decisive in

and

regis¬

are

day, and

defend

willing purchases have built it to
its present proportions. The own¬

precisely

modern

alter

were

of the

incentives

day

is certainly for the people whose

trained Air
Force

process

savings

little

heritage. However,, with workers,
owners
and management
bitter,
one aligned
against the other

products are the fruits of
the incentives I have mentioned.

000 of them—the
employees of the
corporation. Their finished product

equipped

and

the

leading to the development
cost
over
$25,000,000.

nylon

production
is done by the people—over
375,-

goods

from

y ./

long as such a freely com¬
peting, freely progressing estab¬
lished order
prevails, we have

A civilian structure
without these

nation's business is called

inven¬

tered stockholders.

people

time

and

people, 430,000 of whom

liberty

peace

well

machinery

derived

the

freedom

our

modern

enter¬

prevail.

These

<8>-

preservation

gressor can ever

the

It is
only reasonable to assume that a Stock
Exchange man, invited to be with you on
important an occasion as this, might comment
upon industrial expansion and its influ¬
ence on American
economic life. I shall do
exactly that—with a great deal of conviction,
because the

with

—

industrial manpower, with
^ourj
enterprise confident, our
natiorj
has a strength over which no
ag¬

incentives

bora, of patriotism, forti¬
by thorough scientific train-!
ing, know-how acquired by hard
work, with contented, dignified

Research

Exchange executive tells

enter¬

fied

President, Boston Stock Exchange

At graduating
exercises, Boston Stock

for

these

courage

full color. Even electric flat irons
for the left-handed women.

appetite

would

have been close

earnings

$60.00

naturally dipped in the current year and the

strikes will prove expensive.

earnings should

come

Nevertheless, combined

close to $40.00 for 1949.

share.
coal

the Nickel

Earnings
and

common

steel,
share

THE

Thursday, October 27, 1949

COMMERCIAL & FINANCIAL CHRONICLE

(1668)

Trends of

Capital Formation

Reporter on Governments
By JOHN T.

obligations remain

Prices of Treasury

within the limited

several weeks,.

effect for the past

which has been in

ge,

CHIPPENDALE, JR.

trading

.Minor

place in the quotationsdepending upon the psychoigy
the amount pf buys and sells that investors
to a very thin and inactive market. . . . Despite the lack of breadth
the market, quiet accumulation is still going on in selected ^ligibles
nd tap issues.
Commercial banks are doing their own refundg of the December 2s by moving into the higher income obligaons.
Savings banks and other non-bank investors (aside from
e large life insurance companies) are fairly important buyers of the
ger restricted bonds.
.
. .
Deposit banks, both large and small, are eliminating, in most
instances, the December 15 maturity and are putting the proceeds
into the June and December 2s of 1952/54, the 2lis due 1956/59
and the 2Mjs of 9/15/67/72. ... It is reported all of these obli¬
gations have been in for about equal buying. . . . The Victory
Loan 2*4s continue to be the favorites of non-bank investors,
although the 1964/69s are also being well bought. . . . _
and downs take
of traders and

put

RKET

HAMPERED BY

greater consumption or more
savings seeking a fixed income

cates.

Our

(Continued from page 17)
own
risks as his judgment indi¬

will

holders

ricted

price movements with light
in the picture at the

volume.

Apparently the
prospective

present time is the

requirements

of business.

and

happy abandon

be expected.

non-bank

which

will

larger, the

risks greater,

savings are more institu¬
tionalized, and that the propor¬
tion
of
debt-seeking funds is
that

Financing

Demand for bank credit

investors would most

difficult to
This should mean
be seeking an outlet
increased demand, along with

put funds to work in private channels. . .
more funds of investors and traders would

market. . . . This
interest rates, should have a very

in the Treasury
lower

would decrease and

likely find it more

prices of all

government securities

obligations.

favorable effect upon
particularly the higher income

ROBABLE TREND ON

BUSINESS STABILITY

if there should be a settlement of the coal
the very near future, the damage to the economic
iiicture should not be harmful enough to have more than a passing
steel strikes, in

very

intangible.

Machinery

I
An

try to list a few of them.

shall

Investing for venture pur¬

(1)

requires

poses

think.

individual

requires more thinking

putting liquid assets in the
Dank, buying life insurance, or
buying a high grade bond with an
AAA rating. Most of us in an em¬

than

Speaking broadly I foresee
three general courses which the
economy might follow in the fi¬
nancing of future capital forma¬
tion.

starting

Selling
.

approach to this

additional

problem would be to overhaul the
securities selling machinery.
A

prominent corporation president
typed
the investment

recently

banking

system

would

not

"antiquated."

prepared

positive, but there is wide
for development in the sell¬

that

crop,

new

taking on a

back earnings/
developing ma¬
chinery to sell equities to workof other things, such as how to
ingmen becomes apparent. If sales
landle the accounting procedure
management in our business can
for premiums paid by policyhold¬
sell life insurance widely to workers, or how to lay out the assembly
ingmen and everyone else in the
work for putting a telephone to¬
economy, if the government can
gether. As the trend toward fewer sell series E bonds to a broad
independent businessmen and to¬
market, I believe good sales man¬
ward more employees has pro¬
agement in the capital markets
gressed, therefore, there is less could sell equities more widely. ,
stimulus in the working environ¬
What can the life insurance in¬
ment to think about business ven¬ vestment officer do about all this?
new

pense

Persons
laboring jobs think

line of merchandise.

clerical

tures and

venture investment.

plowed

the importance of

volume of venture fact, I would say that for the ordi¬ Very little directly, I would say.
These are big national problems.
stimulated and en¬ nary clerical or factory employee
Revising-the tax laws is beyond
couraged in the future so that it —of which there are so many to¬
the influence of any single group,
is more adequate in relation to
day—or even for the professional to say nothing of the actions of an
debt-seeking funds and to the
man, it takes an extraordinary ef¬
First,

the

funds might be

individual

needs of business.

On the other hand,

are

Securities

Overhaul

to have many causes, some

which

money

...

conditions the government market would no
doubt be strong and new high prices for longer-term issues would
such

Under

gested that a tax credit for sav¬
ings devoted to venture uses be
enacted.
•*'

savings for venture purposes

seems

individuals

their liquid assets or their

every one is losing
room
in the television industry. ployee economy do not have the ing of equities, in view of the
stimulus to think about enterprise
Now let us get back to the cen¬
great need of the economy and
and investment that is true of an
tral problem of who, in the fu¬
the
resources
of the American
independent
businessman.
The
ture, is likely to initiate the sav¬
people. When you stop to think
small merchant, farmer, or sales¬
that the long run effect of col¬
ings and investment to provide
man is thinking day after day of
lective bargaining is likely to in¬
for economic growth, bearing in
subjects related to selling goods, crease the
mind
that capital requirements
wage share at the ex¬

with

full-blown depression.

use

new

;'.tThe strike situation is the big uncertainty large compared to that of equity
funds.
cause a continuation of the impasse could reverse the current ecoomic trend and force business into a tailspin that might bring about
Three Future Courses of

rend

reluctance

The
to

clearest demonstration

of this today is the

capital.
One prominent
for instance, sug¬

economist has,

Capital

greater risks must be assumed by
businessmen as a matter of course.
I think the

ven¬

That

venture

new

capital

larger

capital.

Causes of Decline in Equity

products and will
come
less
from
extending the
market of existing products. These
circumstances
will mean
that

BUSINESS UNCERTAINTY

oremost factor

increasingly from de¬

come

veloping

it is to result in

han

ture

past. As the rate of technological
change increases, obsolescence be¬
comes greater. Business expansion

government market is still in a state of flux, because
well as prospective buyers of these securities are not clear as to
hat is likelv to happen in the next few months.
. . In other words,
e near-term trend of Treasury obligations is causing concern among
nvestors and traders and this uncertainty has made for rather reThe

(4) The future formation of
capital will be attended by great¬
er risks than has been true of the

counter-discriminatory laws.
is, present laws could be
left on the statute books, but new
laws could be added to elicit more

call

Secondly, the large volume of
debt-seeking funds presently be¬

investment

officer*

continue to Changing the "thinking environ¬
think—about venture investment. ment" of American workers or

fort to think—and to

(2) Business has, reputation- enhancing the prestige of Amer¬
financial in¬
ican business is even more remote
converted at wise, Tallen in estate. This is also
ir temporary and minor effect.
,/ . Recovery in the business situaa consequence
of the trend over from individual action. The only
least in part to equity purposes.
!on should continue and demand for bank credit as well as for funds
the past 100 years toward urbani¬ thing a life insurance investment
Thirdly, the government might
f non-bank investors should be enlarged. . . . Also non-government,
zation
and
toward a
laboristic officer can do is the same as any
provide equity financing.
curity flotations would most likely be increased, and these would
economy.
Most people are em¬ other intelligent citizen can do.
I have not included among these
mpete with Treasury obligations for investible funds.
ployees.
Values and prestige in That is, he can keep a wideopen
alternatives the possibility of cor¬
Although money rates would continue low, because of the
the eyes of the community are mind on the matters relating to
porations becoming more self-fi¬
need to foster the recovery and to finance the deficit, there would
shifting
away
from business venture capital. This is an easy
nancing through the plowing back
most likely, be no further decline In interest rates.
ideals.
Children do not yearn to principle to agree to but hard to
. * /,
This
of earnings. Corporations are al¬
would seem to indicate a plateau for money rates, and a top for
be Horatio Alger these days; they apply. It is much easier for most
ready' financing a large share of want to be Dick Tracy—a city
prices of Treasury obligations. .
.
There would no doubt in
of us in the investment end of
their
capital formation out of
time be some brakes applied by the authorities to the business
employee.
It is natural in this the life insurance business to join
earnings; and I believe that the
trend in order to keep it from getting too optimistic. . . . Interest
process that
business enterprise the "down-with-progressive-ineffect of collective bargaining will
rates could be one of these controls and a tapering off or a sta¬
should carry less prestige and ex¬ come taxes" school of thought
bilization of the downward trend, with improved economic con¬
prevent them from substantially cite less aspiration. If most peo¬ than it is to consider new tax
increasing earnings available for
ditions, would seem to be in the cards.
.This would probably
ple do not want to be business¬ issues objectively.
Some fairly
ing administered by
stitutions might be

„

mean

only minor if any further uptrend in

ment securities.

quotations of govern¬

such use.
Let

three

men as

analyze

alternatives

each of these
for

financing:

be facing the afore¬
clarified, it seems capital formation in more detail.
The first alternative is encour¬
.as though price movements will not be pronounced in either direc¬
tion, until a decision has been reached on some of these points. . . . agement of the flow of venture
Only 'about
When the atmosphere is cleared, investors and traders in Treasury funds into business.
securities will then be in a position to go ahead with their programs, 8% of corporate capital formation
which may or may not result in greater, activity and wider price during a recent year was financed
from capital stock. This is a piti¬
changes in the government market.
fully small amount of equity in¬
vestment to be flowing into busi¬
CONTROLLED MARKET INEVITABLE
ness.
At the same time, when the
■
Some money market followers are of the opinion the "directed
net equity investment by indivi¬
economy" of the Administration will result in a long-term infla¬
duals in business was $1.3 billion,
tionary trend in-economic conditions.
Deficit financing, higher
those
individuals
owned liquid
wages, and high farm price supports, will tend to cut the purchasing
savings in the amount of $172 bil¬
power of the monetary unit. Interest rates will be kept down, despite
lion.
To
put the matter more
the inflationary trend, because the deficit must be financed as cheaply
as possible.
This creeping inflation, it is believed in some quar¬ forcibly, when individuals had
liquid savings worth more than
ters, will not have much effect upon prices of government securities,
twice the total value of all the
which will be
Because the government market appears to

mentioned uncertainties which have not yet been

much

they used to, they

strain them¬
selves
about the prob¬
lems of business venture—which
is required for equity investment.
(3) Added to these intangibles
is the more concrete problem that
the tax laws discriminate against
equity funds and in favor of debtseeking investment.
The mere
fact that interest expense is de¬
ducted as a cost of doing business,
while profits bear the burden of
income taxation, is discrimination
enough.. Actually, why is inter¬
est any more a cost than profit
since both are returns on capital
are

likely
to think

less

invested?
of

This is purely a matter

definition

which,

because

in business and convenience
collectors, has be¬
come imbedded in the law.
There
are added discriminations as well,
those which
come
from double
taxation of dividends, the capital

usage

radical
turn
we

sounding tax plan may
to be better than what

out

have got, and

ering progressive
The |

better than low¬
income taxes.

second alternative for

fi¬

nancing capital formation in the
future is by the diversion of the
debt-seeking funds of financial
institutions to venture purposes.

particularly impor¬
financial institutions
wholeheartedly enter the venture
field if the public should prove
unwilling to revise the tax laws
to
encourage
equity investment

would

tant

that

individuals, or if better sales
for distributing equities
not developed.

methods
are

Financial

institutions—such as

savings
banks,
life
insurance
kept within restricted trading limits.
;
companies, trust companies, cred¬
common
stock on the stock ex¬
it unions, savings and loan asso¬
;
This probably means more interference in the money markets
changes, they were willing that
ciations, and miscellaneous insti¬
by the powers that be, since they will see to it that quotations
year to invest only one one-hun¬
tutions—now have about $152 bil¬
do not move too far in either direction.
Protection will be
dred-thirtieth of their liquid hold¬
lion in assets and the annual ad¬
provided on the way down, just as it was in the recent past, and
ings in the common stock of busi¬ gain and loss regulations and the dition of new funds amounts to
limitations will be put on the up side.
One thing it seems a
ness enterprise.
depreciation rules. I think, there¬ about $10 billion per year.
Of
directed economy" with an inflationary trend must have is a
These facts tell us that there is
fore, the discriminatory nature of these
sums, slightly less than 40%
government market that will not be subject to wild and violent"
an ample reservoir of funds,
but our tax laws is a much more basic of total assets and somewhat less
price gyrations.
individuals are withholding their problem than their progressive¬
than 40% of the new annual sav¬
ness.
A progressive tax rate need
liquid assets from venture uses
ings are administered by the life
not necessarily discourage riskWhy are individuals doing this
insurance companies.
Goodbody Adds to Staff
Filoiy Bullard & Smyth
and what is the remedy?
taking. Discriminatory taxes do
All of these financial institu¬
ROCHESTER, N. Y.—John P.
To Admit B. Gavan
I
do
not
feel
competent to discourage risk-taking.
tions. of course, invest predomi¬
Day has been added to the staff
I do not look upon it as my as¬
answer these questions.
I do fee
Bernard J. Gavan, member of of
nantly
in fixed-income obliga¬
Goodbody & Co., Lincoln-Alli¬
confident in saying, however, that signment here to offer solutions
the New
York Stock Exchange, ance Bank Building.
tions with very
little available
the
often-suggested
remedy of to the several causes that tend to
-—mammm*—
will be admitted on Nov. 1 to gen¬
for common or preferred stocks.
lowering the progressiveness of deter equity investment, but some
eral partnership, and Peggy HoWhen one considers that the an¬
steps are obvious.
Revising the
the income tax rates is an overly
Laird, Bissell to Admit
henlohe to limited partnership in
nual additions of new funds for
tax laws is one alternative, but
John J. P. Murphy will become simplified approach to this mat¬
the New York Stock Exchange
investment of these institutions is
not
a
very
likely one because
ter. In fact, I do not believe that
firm of Filor, Bullard & Smyth, a
partner
in Laird,
Bissell &
$10 billion, while the new money
widespread revision of tax laws
a general reduction of income tax
39 Broadway, New York City. Mr.
flotations of common
and pre¬
Meeds, 120 Broadway, New York rates goes to the heart of the mat¬ is very difficult to accomplish.
Gavan was formerly senior part¬
ferred stocks has been only about
Another alternative is to enact
ter at all.
A general income tax
ner
of Gavan & Co. which has City, members of the New York
$1.5 billion per year, it is apparreduction is more likely to result new laws that are what you might
Stock Exchange on Nov. 3.
been dissolved.
.

...

to the revenue

•

Volume

170

Number 4850

ent that the financial

THE

institutions

could

significantly augment
supply of equity funds.

ernment

into

the

enter

and

venture

COMMERCIAL
liatives.

financing

doing in relation to the

funds of financial institutions into
venture capital, I- do not neces¬

sarily

word very much because it

stocks.

opinion that life insur¬
companies ought to mini¬
their purchase of common

ance

mize

the

Atlantic

trust

case,

tions

and

the

pect, go
into

investiga¬

tentative conclusions:

means

peo¬

tion in the United States

life

companies

(2) The standard of living is
closely dependent upon increased
capital formation, and therefore

Athens

joined into
nationalistic state, that was so¬
cialization. Public
education, the

the whole public has
considerable
determination to
see
that both

progress.

governmental post office, and the
Nations are forms of so¬

be¬

kind

(3)

United

criticisms

private placements,
private placements of
stock by new and de¬

I think that

preferred

veloping business is likely to be
a more fruitful and
publicly ap¬
preciated form of equity invest¬
ment for life companies over a
long period. Ownership of hous¬
ing and rental properties - is alsb
likely to be a more acceptable

form

cialization.

Institutional

ment

Invest¬

Equities

equity

investment
There

the

are

making

words,

constant

the

United

States

move¬

this

large

investment

ing what society regards
standards

needs.

and

housing, social
curity, public assistance, etc.,

examples of minimum stand¬
ards which the American com¬
individuals.

clock will not be

clients—whether they

be deposi¬

tors, policyowners, trust benefic¬
iary—to
fulfill
the
contractual
arrangements under which monies
saved and

were

>paid into the fi¬

nancial institution.

These

that
tices

obstacles

mean

that

to be

slow.

the

field

taxation

turned

back

progressive

and

that

income
high', in¬

the

come

groups cannot be expected
to provide equity funds in the fu¬
ture as they did in the

past.

The

new

sources

-equity

will have to be the middle
and lower income
individuals, fi¬
nancial institutions.- or the
gov¬
money

ernment.
the

these individuals

financial

institutions do pro¬

vide the necessary venture funds
do

not

mean

change in investment
is impossible,
but it

because

been

the

is the
moral and legal responsibilities to

obliga¬

this process

has

titude,

there

the

future,

the

social

J move¬

prac¬ ment in the United States is
does to be confined to the

change will have

It will have to wait
.

upon alteration of

and

stepped-up

rate

likely

present
process of socializing a part of
the national income. If the
gov<-

institutions to

venture purposes; or through
govf

financing.

-j

(6) The most desirable of these
alternatives is through greater inf
dividual

participation

venture

investment.
tion

This requires alterna¬
tax
laws to remove or

counteract discriminations against
equities and better sellingr ma¬

chinery to distribute equities. The
least

desirable

alternative

(7)

Ap. investment

officer, of

any citizen, needs to have a peri
spective of business history and to
have realistic objectives
of the

kind of economy that it is
possit
ble to build in the future.- There
is
considerable
opportunity for
the life insurance investment of¬
ficer1 to mould the future course of

laws, re-orien¬
must
provide venture the economy of the JJnited States
personnel, capital to keep up our rate of through his daily actions and de¬
■and perhaps the devising of new capital formation,
then the na¬ cisions.
If the investment officer
policy contracts in which cash tionalization
of; industries in the feels, as I do, that there is a criti¬
values are tied to equities.
European fashion is to be ex¬ cal need for venture funds in the
None of these changes are going pected. A private capital market
economy, he must have
this in
tation

ernment-

of themselves. They will
only if the leadership in life

the

heart

very

economy.

private

have

govern¬

and

ment capital market, we will have

daily, to
explore small changes of law,
new
training and experiences of
investment men, and new con¬

government operated economy.
The government will decide what
kind of business to
foster, how it

insurance wants them to
makes

tracts

come

conscious effort,

with

the

public.

Because

the task is long,

shall

be managed, what it shall
sell, at what price to sell it. These
will all be the conditions of

piecemeal, con¬
tinuous, the leadership in finan¬ viding the venture capital.
cial institutions will only be able
to carry out a basic
change in
its

investment

policy

and

the

unwilling

institutions

converting

for

prevail.

That

is,
gradually

will

economy

of
is

the

United

already

form

the

credit

Farm

and

Credit

financing

are

than

Even

arrangements
Administra¬

Reconstruction

Corporation

un¬

public

and atomic energy.

power

tion

for

This trend

way

some

provide the venture funds

the

States.

der

then

alternative

government

come

their funds

third

will

indiffer¬

are

investment,
the

financing
the

loans.

Finance

like equity
These ar¬

rangements will, in my judgment,
be
expanded and liberalized if
the

needs

the

effect

gradually

business.

who have

who has

to present a

come

it—YOU

MOVE

new

OVER

idea in the hope your prospect will
INTO
HIS
CORNER.
When
you

reach this point in your iconversation
you have made the
may close right there, you may close after a few well

remarks,-you may close after
to buy, you may even close at

sale.

You

thought out

make

you

easy

for

prospect

your

a later date, but
you are in.
" v
Creative selling depends
upon your ability to gain an AGREE¬
MENT to the effect that what
you are proposing is going to be bene¬
ficial to the other fellow. Some one
thing you

may say; your touch¬
one vital point that affects the
personal welfare of the man to
whom you are
talking may do it. When this happens MOVE OVER
INTO HIS CORNER. Let him talk a
bit, let him come out with

ing

keep him on it. Then show him the answer—it is what
you
posing—the rest is a natural moving together toward a
to

problem,

.In the field
not the

only

need.

it,

are

pro¬

solution

>>;•.

security salesmanship, however, the first sale is
you hope to make when you open a new account.

one

Subsequent business follows naturally if a successful result
4s
achieved investment-wise. It is one
thing to be able to sell a man,
but to maintain this
feeling of mutuality, more than good sales
practice in the first and subsequent
meetings with him are necessary.
He must be made to feel
that he is in
absolutely competent hands
as far as his investments
are concerned.
Here personal contact and
the building of a
feeling of MUTUALITY that grows stronger and
stronger month by month, can only be achieved when
-the sales
organization is backed up by
thestrongest and most competent
statistical assistance.
Assuming good investment results, a continu¬
ing interest in the welfare of clients will
•

and

friendship.

always develop confidence

Once

stay there—then

you

move

into

over

customer's

your

corner

your sale is made.

investors,
to outright grantis

sources

there

financing capital

This is

a new

have

had

ever

requires

economy

urbanized, interdepend¬

ent, and laboristic

Those in the invest¬

that

objective view

antees, are
outcome to

people in the financial
world lean on government assist¬
ance, the more
assistance there

possible, by his crit¬
understanding of government
financial guarantees, by his abil¬
ity to do a better job of serving
the capital needs of the economy

will be.

than has

The

being uncritical of the
which this can lead.

The government is often

looked

upon
as
an
aggressive
intervening in business af¬

force

fairs.

think

representation is that government
is
a
rather
passive institution
which

•

merely

fills

is reasonably

ical

the

investment

much

build

the

his

United

States.

the

economy.

investment

this.

and

officer with

with

the

future

government

aids

perspec¬

objectives

He must look at

bilities
upon

It takes

the
of

officer

before,
do

can

economy
••

of the

.:.v%/<

—————

(Special

Connolly Co. Adds
to The Financial

Chronicle)

BOSTON, MASS.—Sylvester C.
Perry has become affiliated with
Walter
30

Federal

Connolly &
Street.

Co.,

Inc.,

was

possi¬

of June 30, 1949 show

capital

has been increased

$102,-

512,000, surplus is larger by $97,-

$348,106,000.
The decline

merly with Raymond & Co., Ralph
Carr & Co. and

line & Co.

deposits for the

entire country shows

a total of $4,The decrease in cash

694,126,000.
and

due

over

from

banks

$4,000,000,000,

the

loans

also

increase

other

this

bonds
total

and

crease

When

governments and
added' and from

totals

the de¬
discounts

and

$1,508,894,000.

subtracted

the

de¬

in loans and discounts it is

found that there

net

gain in

recapitulation

Blue

Book

also

this

shows

new

gain of

113

banking
offices.
This
is
brought about by an increase of
117

branches.

have added 67
state

banks

National
new

and

banks

includes

trust

state

banks

change in
an

and

ing

number of

increase

seven

Paul D. Shee-

private

America,

about

examiners, national bank exam¬
iners, and a complete list of bank
transit numbers and

check

ing symbols with

explanation

each

system,

rout¬

list of clearing
a five year
discontinued bank titles,

houses with
list

officers,

directors of every bank, informa¬
tion about all Canadian, Mexican
and

South

banks

American
all

other

banks

and

countries,

states, and a li^t of accessible
banking points to non-bank towns,
besides many other features.

With J. Arthur Warner
J.
120

Arthur

Warner

Broadway,

announce

New

Co., Inc.,
York City,

that Walter W. Hongler

has joined the firm's sales depart¬
ment.

trust

With A.
(Special

banks.

giving

complete

detailed account of the assets and
liabilities

information

air mail and air express,
banking holidays, all bankers' as¬
sociations, state bank officials and

companies,
and a decrease of eight national
banks. There is also a decrease
of

agencies,

money,

banks

decline of four head of¬

The

a complete list of
all the
officers of all government bank¬

branches, and

companies
have added 50, from which is de¬
fices.

contains

tabulation of banking laws of all

earning ssets of $150,113,000.

In addition to
F.

Reserve Bank, the new Blue Book

for¬

relying
and pal¬

United
decrease of $4,394,148,000. However,
holding of government bonds and other bonds has increased
$1,659,007,000. At the same time,3>

States

ducted

wl|en private enterprise does not Walter
do an

nance

done

daily activities to

future

vacuum

adequate job.
In a word,
the way to have a privately fi¬
nanced economy is to make our
private institutions adequately fi¬

been

ever

accurate

his encouragement of
investment whenever it

venture

Rand

the banks'

amounts

tax¬

;

According to the final 1949 edition of "The Blue Book" the
McNally Bankers' Directory, the total assets of all banks in the

;

Earnings Assets and Capital Funds Higher

crease

economics.

a new

By his

than

economy

before—and

ation,

other¬

gov¬

aid to

Bank Deposits and Loans Decrease

turning back to the tradir

tional

—a

realism

ment field who rely upon
governr
ment guarantees, like FHA guar¬

tive

having the

and
to

for

economy

capital formation are not
wise adequately financed.
The

realism—the

the

financing of
capital formation, and if the fi¬

opinion

he could. Then he suggested that "there is a distinc¬
just talking;and saying something that has an actual
bearing on the sales presentation," In this way it is possible to cut
as

215,000, and undivided profits are
back of his mind every day, but
greater by $148,379,000.
Capital
it must also be tempered with
funds, therefore, show an increase

formation.

serve

come

Not only, must this
objective be in the

long-term

capital by government will only
develop slowly.
It will; come
through additional guarantees to

objec¬

venture

sell equities.

mation, the provision of

the

when his investment banking'
are talking about how to

the

venture

when

friends

has

Equity Financing

public

venture

up,

fairly new
a
private

seeks

housing project

encourage individual

financing future capital ftnv-

placement,
aspects of

if it has

Government

ent

for

firm

economy.

nancial

Like the other two alternatives

daily—when

needs

the

tive of how it wants to

pro¬

mind

business

private lenders,

perspective
economy

fast

investment

come

between

for

government
to
finance
capital
formation, but this will only come
slowly and by default of the other

financing methods.

tion

worked in the field of direct
selling (especially in
intangibles) will verify the soundness of the observation. There is
a
point when you stop talking AT A MAN and begin to TALK
WITH HIM. When this
happens you feel a certain sense of MUTUAL¬
ITY. You no longer are the
salesman—you cease being the fellow

particuf
.V: \
j

financial

ernment

men

need

three sources: through
encourag¬
ing individual savings and equity
investment; through diverting the
of

upon

success

on verbiage and increase sales
efficiency.
Now, I am going to ask you to follow something that is most
difficult to explain. Nevertheless, I am
positive that most experienced

(5) Venture funds in the future
likely to be provided from

funds

the talents and experience of men
teaching others how to sell intangibles.
It is certainly beneficial to obtain ideas and specific suggestions !
from the experts.
Recently, courses in security salesmanship were
j
conducted in Boston, now lectures are being held in New York that
are
sponsored by the Investment Association of New York, and
which are currently being reported in full in the "Chronicle."
■
The ideas presented by Mr. Kelso Sutton in his present series,
it seems to me, are eminently sound. They are not just
theory but
they add up. It is with this sincere tribute that I would like to pick
up one of his points and amplify it a bit.
If you read his address
that was carried in the Sept. 29 "Chronicle," he made the point about
not being a "Long-Winder." He spoke about
talking too much, about
not knowing when to quit, about
selling too hard, about not giving
the customer a chance to
say "I'll buy it." That a salesman who talks
too hard and too long,
might create a feeling in the prospect's mind
that he was being repressed and then he would desire to
get rid of
who have made

down

past

-a

calling

are

him

are

all

tion problem.

make the transition difficult. Most

rate

progress; and the
for venture funds will be

se¬

all,

the

company

minimum

Public

officers and directors of fi¬
nancial
institutions
would
also

the

up,

even greater than
because of greater
risks and obsolescence which act-

mini¬

the

main¬

productivity

lafly apparent.

of socializing income
going on for a good
many years now that I believe the

ment

step

future will

redistribute part
income for meet¬

tion to

The experience, at¬
and* tradition of invest¬

has

(4) Capital requirements in the

powers to

the national

cumscribe the ability of financial
institutions to enter this field on

There is the valua¬

States

at hand to

technical

laws which in large measure cir¬

increase

cialization of income, is the proc¬
ess by which
government uses its

important

even

torical trend has been confined to
the socialization of income.
So¬

large scale.

United
means

living standard.

his¬

munity is assuming

The

technical

tain, and

man¬

by the social group for the indi¬
vidual.

mum

To resume, there are many ob¬
stacles in the way of financial in¬
stitutions going into venture or
scale.

other

ment toward larger social
groups
and toward larger
responsibility

of
to

taxing

equity investment.

Obstacles

the

years has been high, both
in relation to other
countries and
in relation to our own
past.

socialization.

was

over

past 100

When the feudal lords

Sparta, that

By JOHN BUTTON
At last

(1) The rate of capital forma¬

early tribes banded

principalities,

coming shareholders in large cor¬
porations. In spite of the present

Securities Salesman's
I

Summary

Let me summarize the remarks
I have made now into a
series of

this

for hundreds of years

When

the

Exchange—all
profound distrust of big¬

and

United
use

things to different

President of

the

and

Stock

ness

and

speeches of
a

the

New

indicate

in
like

not

even

Congress,

York

many

more.

Pacific anti¬

recent

ple. In a very broad sense "so¬
cialization" has been going on for
hundreds of years and will, I ex¬

stock, at least in the large, wellestablished companies. The tenor
of

"socialization"

States.

■V.

needs

eventuality could be

(1669)

personally

of the economy.,,

roughly summed up as amounting

such

kind of job he

CHRONICLE

critically

the

pose

here, that when I speak
diverting
the
debt-seeking

common

He must look

profoundly alter the economy, and
life, in the United States. I sup¬

I would like to say as an aside

into

FINANCIAL

would

remark

mean

every

including

bank

the

Federal

to The

Ahmadjian
Financial

WHITINSVILLE,
chael

Johnson

staff

Chronicle)

MASS. —Mi¬

has

joined

Ahmadjian

Church Street.

the

Co.,

THE

<1670)

Thursday, October 27,- 1949

CHRONICLE

COMMERCIAL & FINANCIAL

Boafd

when the Federal Reserve

Authority Asks Bids on $30,000,000 Bonds

Port

Public

Utility Securities

California Electric Power
California Electric Power is one of the smaller Western utilities,
revenues around the $11 million level.
It supplies electricity in
areas of California as well as small sections of Nevada.

with

extensive

Bid forms may

ecutive

stock outstanding during the period, against 71 cents on
1,346,889 shares outstanding a year ago. Factors contributing to
the iinprovea s,; .wing were: (1) The $506,000 annual electric rate
average

the

increase granted by

tive Aug. 1, 1948. (2)

'JDam, from which the company this year obtained a large supply of
low-priced secondary power/ (5) Reduction in purchased power costs
'resulting from cutbacks in fuel oil prices to suppliers—Southern Cali¬
fornia Edison Co. and the City of Los Angeles. >
,//
The company's growth this year is indicated by the fact that
'May-revenues were up .15% and June 26%, compared with about
-7%~fPC the;entire* electric utility industry.
Based on this rate pf

estimated 'that isjiare earnings projected for the calendar
-flteb^TTUght approximate;9O0-a$ compared with the 600 dividend rate.

has outstanding two preferred stocks ($50 par)-and two
^Convertible junior preference stocks ($20 par). Full conversions of
jboth preference stocks into common would reduce the estimated 900
/share earnings for 1949 to 780. .This adjusted figure would be slightly
above the share earnings reported for the June 12 months. A small

^Rie.

company

amount of the

preference shares have already been converted; at the

end of August

the company had outstanding 94,540 shares of prefer¬

stocks, 74,950 of 5.5% convertible preference and 1,362,024 com¬
\
1

ence

shares.

mon

Wage rates should stay constant during the next year as a result
of the recent agreement signed with the electric workers to carry
present wage rates until Dec. 1, 1950, and due to a similar extension
of prevailing contract agreements worked out with the ice depart¬
ment

workers

The

months ago.

some

early this year took care of its 1949 construction
needs in advance through sale of bonds and preference stock so that
company

Howard S. Cullman

the purchase cost.

carry

3% of
in

the facilities

from

would

insufficient

open

1%,. -the

SAN

promise for

vided

occur/

CALIF.

economic

—

investors

pro¬

unforeseen developments

pictured

was

Oct.

ments

David

note

Invest¬

optimism.

Rowland

Merrill

Lynch, Pierce, Fenner & Beane,
opened the lecture with an out¬
line

suggestions

for

planning
Empha¬
sizing the importance of indi¬
vidual needs and
goals in the
investment

program.

•successful; planning

such

;program,
Mr. Rowland
carried
-his discussion into familiar terms

through
comparison
with
the
^planning of a vacation trip. '1
The

general

relation

and
was

various

economic
securities

types

climate
markets

industries

staff of Chas. A. Day & Co.. Inc
Washington at Court Street, mem

bers

the

Boston

Stock

easing

them

With F. L. Putnam Co.

economic

(8pecial

the ques¬

BOSTON,
Doherty is

tion

investments,

Mr.

will

ittle

above-par

for

favor

sup¬

Airport and La Guardia

the prob¬
designs

conditions again revive

investor

The

lem.

who

portfolio accordingly—writing
his long-term bonds and

down

■

verse

period.' ;v<?£

&& %
"Ki'A 1

■

Miss

ad- >;
brief discussion 'of V'

Porter concluded her

dress " with

t'-Xi.

major premises upon which gen¬
eral bank portfolio policy should

the

state,

action

;ake

trends.

it by reasoning explains the Treasury's flexible portfolios in times such
remarked, "but
present inclination to hold off on further as these," she
changes in the basic one-year there is significantly little flexi¬
rate until business conditions dic¬ bility in the fundamental rules for
listed these
sound investing."
and proba¬ tate a move.

Miss

Porter

specific

then

possibilities

bilities in the market and fiscal
"(4) Because of the impressive
improvement in the cash position
policy outlook:
of the Treasury—which has been
"(1) Assuming business remain?
pleasantly surprising even high¬
satisfactory through the year-end
it would be logical for the Treas¬ est Washington officials—there is
little probability of an open marury
to maintain the l1/s% rate
BALTIMORE, MD.—The Souththrough the next certificate re¬ set cash financing, outside of bills
eastern Group of the Investment
and tax savings notes, until the
funding of $5,659 million 1 Vas in
Bankers Association has elected
January.
This would be in ac¬ final quarter of the fiscal year.
Joseph W. Sener, John C. Legg &
cordance with the wishes of the That would mean the spring of

SoutlieasFii IBA Group
Nominates Jos. Sener

the

banking community, which natur¬

1950.

ally would prefer that rates not
ease further, and this Administra¬
tion see nothing wrong in pleasinf

scale

cash

the bankers

now

and

The

then.

event

financing

Co., Baltimore,

large-

then,

Chairman

for

notes

succeed

might be employed.

James

"(5) Should business turn soft
again and thus, economic trends

Lemon, Johns¬

Reserve

Treasury

are

Fitz¬

the rediscount rate from
ent level of 1%% or

its

pres-|

responding to

dealer pressure for the reof
a
preferential

to The

Financial

Chronicle)

MASS.—Leonard F
now
connected with

F. L. Putnam &

Co., Inc., 77 Frank¬

Were the fall busi¬

changing rates at this time so

rett & Sons,

Members

Committee

the

Richard

Parker &

closs,

danger of too drastic adjustments
on the other side.
These are per¬

ington;

George

Garrett

reduced to

not

falter

strong

because

1Y4%, thus bringing it
present 1 Vs% rate.
this

in line with the

But while business remains in

suasive

reasons.,

"(6) It

imperative

that

investors realize that on June

al
29

the

P. Dunn,

were:

upward again, there would be no

Nominating

presenting

expectedly adverse developments,
the rediscount rate well might be

Robert Gar¬

Baltimore.

that in the event of a sharp swing

recovery

Stock

Exchange....

and Edward P. Dunn,

were

lin Street, members of the Boston

struc¬

Treasury rates have on all other
lending rates and markets. There
is
the
feeling that authorities
should move with great caution

un¬

ness

the

sale

'do-

gerald concluded that in terms of
present inflated price

the

beyond

discount rate.

examining
situation

his

establishment

gerald of Dean Witter & Co. After
current

refund

Chairman ports.

Treasury-Reserve

levels."

some

change.

considered by Philip J. Fitz¬

the

policies

new

the San Francisco Stock Exchange

closed its forum series

whatever

adopt

ton, Lemon &
Board
and justify further action, the oneCo., Washing¬
working closely to¬ year rate well might be permitted
ton. Named as
gether today—more closely thar to reach 1 % and a pattern of note
Vice
Chair¬
Questions from the audience at any time in modern financial refundings might be geared to
men were: W„
that rate.
But there is strong re¬
closed the program. This meeting history—and both see the advan¬
P e t o n May,
sistance among today's officials to
marked the successful completion tages at this stage in a generally
Investme n t
a lower rate than 1% on one-year
stable money and bond market.
of the Forum of four lectures on
Corporation.of
money.
There is the feeling that
"(2) The bill rate, though, is to
"The Theory and Practice of In¬
Norfolk, and
while banks might be properly
be
allowed
more / play,
more
vesting
Money
in
Stocks
and
W. Carroll
asked to accept such slim returns
Bonds," sponsored by the San flexibility than in many years
Mead, * Mead,
Within sensible limits, it is to be as %% on certificates during
Francisco Stock Exchange in con¬
Miller & Co.,
permitted to move as the markel period of emergency war financ¬
junction with the Adult Educa¬
B a 11 i m o re.
Joseph W. Sener
decides and the
Reserve Oper ing, they should not be asked to
tional Program of the San Fran
JohnC.Hagarr,
cisco Public School System. The Market Committee is not acting to accept similarily meagre returns
Jr., Mason-Hagan, Inc., Richmond,
week-to-week
fluctua¬ during a period of peace, even
first such series ever offered in prevent
In
accordance with
the though this is
a
most uneasy Va., was chosen for Secretarythe history of the San Francisco tions.
Treasurer.
/-■ v r.
There is the belief that
Public School System, the forum Reserve Board's stated desire for peace.
Members of the Executive Com¬
flexibility and a freer banks may properly ask for bet¬
has enjoyed widespread popularity 'greater
expression of market forces,? the ter rates than these, in view oi! mittee, in addition to the officers*
from its initial meeting on Sept. 23
Wilfred L.
Goodwyn, Jr.,
Open Market Committee expects their higher overhead costs and are:
Olds,. Washington,
and approves these bill rate fluc¬ their need for covering these over¬ Goodwyn
Joins Chas. Day Staff
head costs without resorting to un¬ D. C.; J. Murray Atkins, R. S.
tuations now.
■
(Special to The Financial Chronicle)
"(3) Against the present busi¬ due speculation in investments or Dickson & Co., Charlotte, N. C4
BOSTON, MASS.—Andrew W
Dunn,
Auchincloss,
ness
background,
the
Reserve loans. There is the recognition in Richard P.
Pollock, Jr. has been added to the
Board hesitates to act on reducing the tremendous impact changes in Parker & Redpath, Washington;

ture, a majority of stocks are sell¬
ing today at bargain prices.

outlook

in the future, it may

and now and

Tobin, Ex¬

money rates or to encourage

year

FRANCISCO,

favorable

ket to escape

It is aware of the banking she
said, suggesting
that only
system's opposition %o the reduc¬ "when corporate bonds offer suffi¬
nothing' policy for the time being. tion because of its possible de¬ ciently high yields and high safety
They believe this is no time to be pressing influence on some other to justify large-scale shifts from
pushing tor action in either di¬ rates. It fears it might be criti¬ governments should such shifts
De made.
All bankers should be
rection—to be trying to discourage cized for acting when no action
business expansion by tightening appears
necessary.
The
same flexible in thought and maintain
of

Federal

with

of a strong mar¬
from previous com¬
mitments to hold specific prices

it took advantage

and New York International Air¬

cash borrowing in the
market may be delayed until

is currently selling on the Curb Ex¬
8%-6%) to yield 7V2%. The 5.60% ($1.12)
convertible preference stock is selling over-counter around 22 to
yield 5.1%; it is convertible into 2% common shares, hence it is at a
conversion paritv with the common.
The 5%% preference, which
sells about 2 points lower, is convertible into 2% shares. Conversion
privileges have about nine years to run.

Teterboro

new

inclination

California Electric Power

Economic Outlook

~
or

multiples of one-eighth or

authorities

to the recent favorable action of the

Forum Sees Favorable

all

for

With the knowledge

approval of the Treasury,

"There are and will
board is reluctant to oe based.
that'might be mis¬ continue to be opportunities avail¬
late in this fiscal year.
interpreted as a sign that it again able in the government market
"Under these circumstances, the is
worrying
about
economic for safe, profitable investments,"

says

city's special committee.

change at 8 (ian#6 for

/*;;.•;
be obtained from

(Continued from page 9)

The properties in question ^account for only

financial quarters prior

page.

and tacit

Opportunities ior Bank Profits in
Federal Refunding

System revenues, but undue weight had been given the threat

some

the straitjacket of the long-

term

protecting himself to the extent
necessary lit shortest-ierras-^wjll

special committee appointed by the City Council of Corona that the
community retrain trom nurchasing the local electric distributing
facilities of the System. The reason assigned was that rates now are
income

one-tenth

threat of municipal competition in the area now seems to
have been eliminated through the unanimous recommendation of the

the

of the bonds and the coupon may

The

that

: rom

ports; for rigid pegs up and down
$10,000,000
ol
i;he list; for, in short, creation of
temporary airport notes and for
another straitjacket.
But there is
capital improvements during the
significantly great favor for sup¬
next
year
at
Newark Airport, port and management when
used

Authority
not
exceeding
3y«%, Mr. Cullman stated .The
Port Authority will accept a dis¬
count up to 5% Tof, the par value

will not be required until well into next year
(about one-third of 1950 needs have probably been taken care of).

low

auditorium at

Director of the Port Au¬

Proceeds

Austin J. Tobin

Port V

additional financing

.definite/anti-

deems
in
the
general interest,
thority, 111 Eighth Avenue, New however, the overwhelming opinYork, beginning Thursday, Oct. ion
among today's officials is that
27. It is expected that the official
while, the exact pegs selected in
statement
describing the bonds 1948
might be subject to some
will be ready at that time.
criticism, the support policy itself
The bonds, dated Oct. 1, 1949
was absolutely vindicated by sub¬
and due in 1979, will be callable,
sequent events and the program
in whole or in part, at 103% be¬
stands as one of the wisest in Re¬
ginning in the fifth year; at 102% serve
history.
And should there
beginning in the tenth year; at
be
a
sharp
turnaround and a
101% beginning in the fifteenth
renewal of heavy liquidation, it is
year; and at par beginning in the
ogical to expect that support of
twentieth year. Sinking funds will
the bond market again would be
be established commencing in the
adopted as a basic Reserve-Treas¬
tenth year to retire the entire is¬
ury policy.
There is significantly
sue by maturity.

are

the California Public Utilities Commission, effec¬
Gains of 24% and 37% in residential and com¬
mercial revenues, respectively (due in- part to the rate increase).
'(3) Despite lessening importance of industrial sales in the 'overall
picture, this branch of business was still ahead by 6%. (4) Better
water conditions at the company's own hydro dams and at Boulder

policy'to

deflationary basis, it also escaped

the office of Austin J.

$1,618,924 against $1,407,622 in the preceding 12 months, an increase
of 15%. Common share earnings were 77 cents for the latest period
on

must

none.

relatively small with the exception of San
Bernardino and Riverside (served at wholesale). Electric sales ac¬
counted for 82% of revenues, telephone and telegraph services 8.8%,
and ice and cold storage operations 9.8%.
.MrV'""" 1
Of the electric revenues, residential and rural approximate 46%,
^commercial 24% and industrial 27%. The company obtains much of
its electrical requirements from its own hydro plants (about 70% last
year) bui also uuvs from the Boulder Dam and is interconnected with
other utilities.
Average residential usage last year was 1728 kwh„
and the average rate was 3.230.
Consolidated net income for 12 months ended June 30, 1949, was
'Communities served

Bids

added.

rate not
to exceed 3%%, and the bonds
will be awarded on the basis of
the
lowest interest cost to the

asked to name a coupon

ket

.'<•

its shift in open mar¬

that The Port

York, at 11 o'clock on Nov. 2, in
Terminal, Second Series (First

111 Eighth Avenue, New
the public sale of $30,000,000 Air
Installment) Bonds. Bidders are^
its offices,

By OWEN ELY

S. Cullman announced Oct. 24
New York Authority will open sealed bids in the
Chairman Howard

announced

slate

Auchin¬

Redpath, Wash¬
D.

Sons,

Edwin B. Horner,

List,

Robert
and

Baltimore;

Scott, Horner &

Mason, Inc., Lynchburg,

Va.

Volume .170

Number 4850

LETTER TO

THE

COMMERCIAL &

THE EDITOR:-1'
••[
»
R

'S-;'1.1

Says Gold as Standard Money Cannot Have Price
f*

J:'--

Edward Henry Neary
T; ?

Sir

mmm

and Financial Chronicle:

Stafford

Cripps is a man of high moral standards; yet he
several times
publicly denied that the government would devalue the
pound; "diplomatic denials" they are called. •

Commenting

there

isn't. much " chance ' of

that.

The

the

standard

dollar

unit

consisting

Code,
Jan.

section

31,

314;

15 5/21

(31

have

price.

axiomatic

•

That is

that

The

nearly

difficult
Bullion

Re¬

Marx,

Capital, Chs., I,
XII, labors with it at length.)

II,
A

standard is that with which things
other than the standard itself are

compared.; To

/ two

from

compare

requires

subjects of compari-

soru

Jan.

TJie ' yerb%'"td/^rapare!Vv is

tl^/Latin "comparare'Y

31,

•

ferences.

grains
of

0.9 fine,

10 59/105

a de¬
grains of

our

pay
dollars
States
were

within the ' United
repudiated by the

proclamation of March 6, 1933, ap¬
proved

by Act of March 9, 1933,
which prohibited the transfer of
gold.

For

example,

notes

serve

are

Federal

Re¬

$23 billion out of

$27 billion of money outstanding;
these

but

notes

money

not paid in gold
tender. Our paper

are

legal

are

at a discount; this
by the so-called pre¬
gold at home and abroad
now

proved
on

fact

discount

similarities

paper; this; fpllows from the fact
.and/ to that gold
h^/npt^price./; %M /

and

gold,

price is

dif-

i.e.,

-/' the dollar; which is only a
specific
'; quantity of gold.,
;
Assume that the proposition is

To give away billions of such
repudiated, depreciated, currency
to foreigners may seem to some

to be harmless. But the foreigners
use it to obtain our goods, our real
then (1st), The price of
wealth. "It is the goods they want,
15 5/21 grains of gold 0.9 fine is a
in the end,'' said Gov. Eccles.
dollar. (2d) The dollar is 15 5/21
The
proposition to raise the
grains of gold 0.9 fine. (3d) Sub¬
price of gold is in fact to depre¬
stituting:
The price of 15 5/21
ciate
further
the
dollar.
The
grains of gold 0.9 fine is 15 5/21
remedy is for Congress to reduce
grains of gold 0.9 fine. A truism
spending, to restore gold to cir¬
or
identity which conveys no
culation and to pay gold when de¬
meaning.,
manded in satisfaction of promises
The importance of knowing that
to pay dollars.
gold cannot have a price is that

false;

1933

people

and
were

ministration

January,
told
raised

1934,
the

Ad¬

that
the

price

gold, i.e., bank cheques

paper

One Bond Issue Rather
Than Series

EDWARD HENRY NEARY

the

Proposed

Port

to the

investing markets of Cuba,
United States and Canada;
income derived from

"That

discounts

tions assigned

compensa¬

to the members of

Financing of the Cuban Govern¬
the syndicate formed for the issu¬
new
$100,000,000 program
of public works projects should ing of these bonds be satisfactory;
"That the
issue or issues of
be done through the flotation in
this country and Cuba of a single bonds representative of the debt
bond issue rather than through a be approved by the Securities and
series of bond offerings, Enrique Exchange Commission, and listed
Godoy, President of the Banco on the stock exchanges in Havana
Godoy-Sayan of Havana and of and New York."
the insurance organization of Go¬
Mr.
Godoy also stressed "the
doy-Sayan, declared in a state¬ imperative necessity of checking
ment released Oct. 19.
the
engineering, technical,
ac¬
Pointing out that the Republic counting and legal aspects by en¬
of Cuba undoubtedly is able to gineers,
public
accounts,
and
float an issue of any number of lawyers appointed by the organ¬
bonds provided the money derived ization assigned to carry through
from the bonds are to be invested the operation, in order to verify
in projects capable of producing their economic, engineering and
revenues, sufficient to
cover the
legal status.
debt

represent, Mr. Godoy
in connection with the
proposed financing:
they

also urged,

"The constitution of

preferred mortgage

first and

the income

derived from the proj¬

or revenue

ects carried out with the loan, and
on

the proj ects themselves;

"The

pledge of the full faith and

credit of the Cuban Republic;

"That the construction, admin¬

istration,
and

operation
projects

management,

maintenance

constructed

the

with

the

moneys

otherwise—with

States is yet another factor whicb
tends to reduce the gains that are

expected

derived from

to be

valuation.

devalution

many

prob¬

has

solved with
stroke

be remembered that after
tl?e
shock of the suspension of

been
a

gold

the

were'%

•r

change
This

"shot,

morphia".
(as the oper¬

ation

de¬

wonder

that

enthusiasts

While

Einzif

;/;/■.-

large, extent subsided,
have once more

be viewed

with

generally

that the government

devaluing,: the
who

expect

sudden

after

right in
of

those

substantial

the

concern.

admitted

was

number

improvement, such
rienced

was

expe¬

suspension

the

gold standard in 1931, is de¬
clining fast.
The

announcement

tween

gold

Sept.

that

be¬

and Sept. 30 the
increased by £20,caused some disap¬

reserve

000,000 only
pointment. Before Sept. 18 it was
widely believed that the short po¬
sition

in sterling was very large,

that

much

into

3^%

covering purchases after

devaluation would be very con¬

form

definite

ments

overdue

were

sterling

pay¬

not made immediate¬

ly after devaluation, the chances
that

moment.
said

the

bulk

the

The

them

earliest
result

have

been

What is much

was

possible
be

cannot

impressive.

are

the

quotation
would

disappear

sterling
as

re¬

sult of the devaluation have failed

materialize.

sterling the
ted

are

some

Various

use

quoted

extent

types

of which is limi¬
at

discount.

this

inevitable.

After all, if sterling

which, though

inconvertible,

sterling.

evidence of
the

the

Dollar

optimism.

will
in

have

that

order

Possibly the,

increase of export®

Area might

But
be

substantial

very

revive
increase

the

should

that effect.

produce
■

" / 'r

Gilbert Gurrie Heads
Detroit Bond Club

electorate^ would

pursue even

-radical <; Socialist ; ipolicies
than it did during the past four
years,vmaybe
the
immediate
of the fall.:' But the wide¬

cause

spread feeling that all is not well
in respect of the effects of the
devaluation

must

sponsible for the
mental trend.'

partly

adverse

re¬

funda¬

-,»•«,

The absence of any evidence of
determination

on the part of the
to resist the trend
an increase in
wages and
of public expenditure
may have a

government
towards

great deal to do with the atmos¬
phere
of pessimism.
Although
Sir

Stafford

Cripps insists

maintenance

the

"wages ceil¬
he is prepared to admit

ing,"

even

the

claims

the

There is

in favor of

pressure

lowest-paid
widespread

minimum

equally
widespread demand on the part
of higher-paid workmen to parti¬
cipate in

any wages

increases. All

this pressure
as

is likely to increase
and when the devaluation pro¬

duces its full effect

now

the cost of

Even Sir Stafford Cripps

admits

cast

that

there

will

excess

of his

original fore¬

1%-

The

government,

while

condemning any automatic
increase of prices, has shown a
very bad example by raising the
sterling prices of base metals sold

by the Ministry of Supply to the
full extent of the devaluation, in
spite of the fact that it owns large
pre-devaluation stocks and that

Reginald

Gilbert S. Currie

the

Bond

Club

announced.

Mr.

been

identified

with

Club

for

was

MacArtbur

Detroit
Currie

Bond

the

and

many, years

ha®

prominent figure in the field of
investment banking.
»
Other officers elected

are: Regi¬
Miller, Kenower
& Co., Vice-President, and
Victor P. Dooghe of-Blyth & Co.*

nald

MacArthur of

and

Secretary
tors

are

Gatz

Treasurer.

Direc¬

the officers and Joseph-

McDonald-Moore

F»

Co.,

retiring President; Merie J. BowBraun, Bosworth & Co£
Kelly, Jr., of Halsey*
Stuart & Co., and Frank P. Meyer
of First of Michigan Corp.
yer

Ernest

Wadden, Cooney Willi
Kidder, Peabody Go. /
•

CHICAGO, ILL.—Kidder, Peabody & Co., 135 South La Salle
transferred fairly freely is worth much of its supplies are covered
Street, announced that William ML
from non-dollar countries. Having
$2.80, it stands to reason that ster¬
Wadden Jr., former president and
ling the expendability of which is set such a precedent for profit¬ treasurer of Wadden, Williams &
limited should be considered to be eering, the government will not
Co., Inc., has become manager of
be in a strong moral position to
worth less. What is felt in
the stock department and Walter
many
quarters is that the choice of a resist similar action by private E.
Cooney, associated with the*
11
•'
- :
•»,,
surprisingly low rate has failed to firms.
Wadden, Williams company until
It was expected that devalua¬
"Regarding the manner or the achieve its end. The main reason
its dissolution Oct. 17, now is at
time for making only one issue of
tion would be accompanied by an
member of the trading department
why sterling was cut by full 30%
bonds and of receiving the moneys was
economy drive, following op the in their
that
the
government
was
Chicago office.
derived from their sale, it is my anxious to
of
1931.
While
the
do away with the dis¬ precedent
Mr. Wadden has been a La Sail#
opinion that the bonds should be count on sterling in various un¬ government departments are in
Street figure in his own and other
issued at one time for the total official markets abroad.
fact pressed by the Prime Min¬
It now
firms since 193-3. He attended th®>
ister and the Chancellor of the
necessary amount for completing seems that in
spite of the heavy
University of Virginia and is »
a
construction plan of specified cut the
Exchequer to reduce their admin¬
discount is still there and
member of the Knollwood Coun¬
istrative
costs
projects, even though the amount its continued existence
by' some 5%—a
may pos¬
try Club. ■>//;'///'.
derived from the issue could not
mere
drop., in the ocean—it has
sibly provide
opportunities
for
Mr.* Cooney was with Fred Wbe immediately invested in such
operations leading to losses of the now been admitted that the cost
of social security services, so far Fairman & Co. before the war and
projects. These moneys should be dollar proceeds of
Sterling Area
joined Wadden, Williams & Cofrom being reduced, will be al¬
placed under the custody of the raw material
exports.
Although
lowed to rise even further.
On after army service from 1942 t®
Fiduciary Assistant Attorney ap¬ there is a difference in the
degree
>
\
:'
pointed by the bondholders, who to which this factor is likely to the occasion of his Budget speech 1945.
will draw against these funds to
in April, Sir Stafford Cripps de¬
operate / against
Britain on the
clared that no supplementary esti¬
pay for work done, service ren¬ basis
of
the
With Hill Richards I
present exchange
mates must be submitted.
Now
dered, properties acquired, etc.,
(Special to The Financial. Chronicle)rate, it is disappointing that the
solely and only against certificates drastic devaluation seems to have he accepts the inevitability of an
LOS
ANGELES,
CALIF. -signed by the persons previously failed to achieve one of its main increase of the cost of the National James C. Johnson is now witlt
Health Service.
designated for this purpose."
• '
ends.
Hill, Richards & Co., 621 Soutlx
can

spent

and

loaned be handled by autonomous

organizations, controlled by
Fiduciary Assistant Attorney

the
rep¬

resenting the bondholders;
"That

the

principal1

well

the interests of the bonds be pay¬
able

Cuban
par,

Havana
or

New

American

York

currency

at the bondholder's option;

"That

the

amortization

rate

plan

interest

and

;;

The

insurance

Godoy-Sayan
ber

organization) of

represents

American,

num¬

English

satisfactory Canadian companies.

and

The

loans
cause

/""„

The

fall

government

October

yet

sharp
in
as

well

effect of the de¬

valuation disillusionment.

another

It will

'a*

more, i

ing is that hopes that the discount rise in
abroad

com¬

gether with fears that the Labor
Party, if confirmed in; office by

living.

disappoint¬

maximum result for the depre¬

ciation of

Internal political devel¬
be responsible for

wage arrangement and an

all

plete absence of that stimulating
atmosphere which in 1931-32 went
a long way towards
ensuring

may

workmen.

that

There

DETROIT, MICH. — Gilbert
setback.
The anticipation of
Currie, general partner of Crouse
early / general election, to¬ & Co., has been elected President

Paul

Dr.

and the prospects
come

under¬

able to convert

Loan

premature

the

de-

rise,

disillusioned.

Although it would perhaps

opments

pessimists)
has

•

was

War

respect.

scribed

its

judgment, it seems that history is
not likely to repeat itself in this

effect

the

psycho¬

logical

issue.

the better.

the

spent

loans

substantial

Treasury

the

for

1931

first

that towards the middle of 1932

the

government

went

now

bound

standard

force,

pen, or at any
rate thing s t

ment's

cessive devaluation of sterling.
The fall in prices in the United

nomic

effected
or

rev¬

such

are

these bonds be tax exempt;

taxation

will

siderable. The large extent of the
cut in the exchange value of ster¬

22, 1949

ex¬

early); oppor¬

higher cost of production and thi®
wipe out some of the safety
margin created through the ex¬

•

was

ling
further
stimulated
these
hopes. Even though it is possible

Oct.

"That the

For Cuban Government

LONDON, ENG.—The enthusiasm—genuine

Washington, N. Y.

tunity for raising

which the devaluation of
sterling was greeted in many official and
unofficial quarters over here is
wearing off rapidly. During the days
that followed Sept.
18, many people were inclined to believe that
Britain's eco*•••<•"
<$>

273 Main Street

take

Already the tax on
distributed profits was raised
from
25 to 30%. Higher taxation mean®

greeted in
Britain, Dr. Einzig notes change of sentiment arising from failure of
to bring substantial
improvement in economic situation. Says
discounts still prevail on various
types of sterling exchange, and
prices of, British Government obligations are still
falling. Looks
for heavier government
expenditures and possible higher taxes.
:/

lem

complete the description of
currency, etc.: obligations to

which

The

proclamation

act>. i.e.y to ob*

pr more- objects

note^ their

the

.•

into

gold 0.9 fine to the dollar.

inflectional •andindi*

J^<fei/e-twip

1934,

preciation

mium

s^cahes - aetipiir
-

ounce

dollars

issued which fixed the weight

i.e.,
"par*','/£qual;

^'con'Y /with) , and

15 5/21

Proclamation

The .standard of
value is therefore gold and cannot

port;

is coined, the less
weigh. Finally on

was

1934),

//explain. -(Cf.
.

the

value

grains of gold 0.9 fine

which

each coin must

Next, .what does "raising
price of gold" mean?

By PAUL EINZIG

enue.

move

Secretary of the Treasury likewise has publicly denied that
the "price of gold" will be raised.^
Are they diplomatic denials?
They money for more than the coinage
almost infallibly will, be unless ^value
($20.67) were paid for gold.
the Congress stops overspending,
and

pected

enthusiasm with which devaluation

disinflationary policy, he is

says

Obviously the

; r >"

■

Bf ltlSli Devaluation

Our

■

(1671)

proposition to raise price of gold is
merely to increase discount on our paper money.

Editor, Commercial
i

■

FINANCIAL CHRONICLE

changes are that the total

national

from

expenditure,

far

being reduced, will actually

increase.

Cripps

And since Sir Stafford

wants

continue

his

Spring Street, members of the LosAngeles Stock Exchange; He wa®

previously ,>vith William Walter®
Securities Company.

/'
t

THE

(1672)

COMMERCIAL

behavior* action."
that when we
type of security? Why do they do
become hungry the thing to do is
it?
: \ •V.;.'/*''j 01 \
to eat. The mechanism of taking
Now, as salesmen, you must that action reduces the tension.
"adjustive

have

You

question.

got to know why peo¬

securities, why that ac¬
If you do know,
will have the key in
knowing what to do in oruer to
make a purchase occur. If you do
not know, you will find yourself
ple

buy

tion takes place.
then

you

knowing

bit lost in

little

how to put over a

good sales can¬

vass.

Making a purchase is a human
activity. It is a piece of human
action, and if you are going to un¬
derstand why a person bu>s some¬
thing maybe we snould look, for a
minute, at the subject of why peo¬

What is t..e mo¬

ple do anything.

tivation behind any human activ¬

why did we spend our money the
we did?

way

takes

understand

place to

activities?

these

motivate
can

that

stocks and bonds.

are;various basic reasons

by'psychologists relative

set forth

to the motivation of human activ¬

Just which of the psycholo¬

ity.

gists is
the

correct, I don't have

slightest

the

reasons

but

some

the pin

into his

arm very

gradu¬

action

the

simply moving away a little bit.
But if I were to give the pin a

human

pretty difficult time explaining
how hunger was the cause of my

jab, I would certainly get

forceful
a

milder

.somewhat

greater response from him.
The degree of the irritation, or

of the tension,

determines the de¬

of response to that tension.
Other people say that all human -So, when you are out selling any¬
activity is motivated by sex thing what you do, technicallydrives.
It was Freud who first speaking,
is to "irritate" your
put forth that theory. Later, he prospect, by making him intensely
changed his opinions and called aware of a lack of something in
it "eros," a combination of other his -life, or in his conditions.
things.
Salesman, an External Stimulus
action.

(

pin in our
friend, sitting here, and gave him
a
good jab with it, he certainly
would do something to get that
pin out of his arm. He .would take
some action.
Now, if I just put

all

that

'v.;® vl:;

Jung

says

which

drives

Others

gree

vr'

"libido"

the

people to action.
is "self-preserva¬

say

tion," and still other psychologists
say no, it's just the reaction pat¬
terns

^rom various stimuli

that

You act as an external

stimu¬

lus, which sets up a mental ten¬
sion inside that prospect, mak¬
ing him feel vitally aware of a
something. Then, through

need for

presented to people.
Then,
again, Jit is held that there is a
"pleasure-pain" principle in life
which motivates us, that you move

selling

your

feeling

need,

condition
to make a

action,
you

develop

that

into

want

but

buying

bit

that,

to do

order

ure.

from pain and toward pleas¬

Those

different theories set

are

forth.

which

one

not

combination

But

have to

decide

right.

Maybe

them " is

do know that there is

right.
some

motivating force behind every ac¬
tion, that our activity is not point¬
less, that there is always a reason
for

doing things.
a particular reason
that individual left 72nd

our

And there is

why
Street

and

down

came

Wall

Street to

buy some bonds. What
we
are
trying to explore, for a
minute, is the reason why that
activity takes place. There is a
cycle

should

human action that
into for just a

look

ment.

'.V-K'*;':.'

Let's

mo¬

consider

must make them want it bad

enough to figure, "Yes, I'll spend
that amount of money to satis¬

want."

better

become

hungry,

and

and that

fueling of hunger sets

drive within

get

that

sense

something

eat.

hunger,
up

out and

When

have finished eating we feel better

again.
'

This represents a
occurrence

parts.

hunger

in life, which has four

First

was

itself,

contractions

maybe

very common

by the
chemical juices,

that, on the whole, the want
on the part of the American pub¬
lic for securities is not as great,

tension inside of us,

set

tension of

hunger.
As the hunger increases the ten¬
sion becomes greater and greater.
The
greater
the
tension,
the

greater the drive urging
out and

to go

get something to eat.
The drive sets up what is called

buy

would buy

Some of the com¬

mitments, there, are for social ap¬

quite in
»

it should be, or

what
to

tion

you

know

to sell, you
something about

have

buying motives to appeal to.
are
talking about motiva¬

of human

activity. You

will take his extra money better yourself, as far as the ser¬
it in a ranch, out vices were concerned.
West,
that will
return
him a
Also, you might spend a little
pretty good income, throughout the money on education, to better
year.
Still another person will yourself, and that is the third
take his extra money and, send
category. Would you say that your
two
or
three
young
people investments and securities were
through college with it, because sold at that level, at the third
person

invest

and

that is what he wants to do with
his

means

how

level?

Other people might
The
fourth
classification
quite easily be influenced to place
luxury items, jewelry, fur coats,
their extra capital in investments.
summer
homes and replacement

But

everybody doesn't have the
wants.

people to do just that.
In

buying and selling, the mo¬
tivation forces are called buying

to say, "No, you listen.
what I want." He can't

chance
Give

only

that.

say

has
r

dollar.

half ' a
>■

of. items before they are worn out.

when he steps

But

selective, and the sales jobbe handled
with much

has

still another raise and greater care.'
making quite a bit of
The Category of Investment
money now, and you feel that you
Selling
There
is
a
rating of human cafi spend some of it on these
Let's go back to our four cate¬
wants; the intensity of wants, and luxury items. Would you say that
the urgency of wants vary greatly investments and securities were gories at this point. In what cate¬
and I have set up what I call a sold at the fourth level? At which gory does the investment selling
fail?
Basic necessities, more-. of
normal rating of human wants, level -are investments sold?
them, products and services that
which is divided into four classi¬
Time Urgency Factor in Buying
add to our pleasure and enter¬
fications of wants, and I will dis¬
and Selling
tainment and progress, or luxury
3
cuss
these
classifications
just
items? The farther down the scale
briefly in order for you to decide
I want,, to acquaint you with
same

You

Normal Rating of Human

got

you. are

Wants

something that is most important
in any salesman's work, and that

is directly

tinue
die

human

the

out.

would

not

race.

lacked

able

related to the subject

choice, or selection, as far as your
buying is concerned. You just get
in there and you get the blue

would

health

get around

Are

ties?

basic necessW
selling basic neces¬

you are

second

classification

this

imagination.
if it is just within
his imagination, the person -who
does a smart selling job must re¬
alize that what he
is doing is
building up, purely as a mental
his

Therefore,

the

condition,

customer's

desire

something, and his need and
want for something, and the sales¬
man who sells that kind of a prod¬
uct or service has got to be a
for

man, because he is dealing
something more intangible, the

smart
in

projection of the human mind..
That is what you do when you
sell investments* and, .securities.
You

project

tion

customer's imagina¬

his want into

'■'j Let's

see

the future.

if we can determine

you

coat,

and

there

again

there is not much selection, as far
as

you

great
that

concerned, and not a
of selling is done in
either.

are

deal

case

you

earn

money

and

into the second classifi¬
cation where you are able to buy

somewhere, to shelter
yourself, and provide some com¬
fort, and if you got sick you

come

get a room

would spend some of your money

away

just getting

warm,

you

sities?
The

from the urgent
it is to sell, be¬
cause the person in the last cate¬
gory entertains that want only in
his imagination.
It is once-re¬
moved from an immediate want.
He is not going to use it right nqw.
He is not going to put that coat
on, because it isn't cold out right
now, but he is buying to antici¬
pate something, and the satisfac¬
tion of the want he has is purely
come

you

wants, the harder

where investments and securities
a coat to keep
have to get it fit, as far. as. this rating of human
quick and you have just so much want is concerned.
Investments certainly are in a
money, very little money to spend

investments
Are you

are

motivate

job that is
get
wants,
the

out of his
limousine and has $5,000 in his
pocket, the salesman certainly has
to treat him differently.
v:
As your .wants get away from
is very vital and urgent needs, your
buying selection becomes much

money.

higher quality and an extra quan¬
interested in motivating
people tity of the basic necessities. If you
in a particular line of activity, were making a very, very poor
namely, in making purchase of living at the present time, just
your
investment securities, and enough to get by on, you would
we are discussing now the ways
buy food and liquid. You would
and

the sales

The farther away you

you

for

tensity
done.

basic
human
proval, approval of the people that from
associate with, and if you tougher it is to sell something
§ny two people on the face were married you might buy cer¬ because the fellow doesn't need
of the earth. They vary a great tain
products which would
be it right away. You can't simply
deal. One person might want to called time-saving products and say,
"Now, listen, there it Sis.
take his extra capital
and buy instead of doing all the labor Take it or leave it." He's got to
a Summer home with it. Another
take it. He needs it. He has no
yourself,
manually,
you
would
Human wants are not the same

istence

might be.

So, there is an indirect propor¬
between the urgency of the
want and the intelligence and in¬
tion

with

perpetuate our individual ex¬ plate special quick. You are hun¬
by earning a living, one gry and you want to eat "right
"
This indicates that perhaps a way or the other, and the last now."
• There
two, cleanliness and transporta¬
more
intense selling job should
certainly is not much
be done to stimulate that want. tion, I add, because I feel that in selling done in that situation. The
civilization if you don't keep clean man. behind the counter doesn't
Now, if you are going to know
and if you are not able to get to go to very much trouble in selling
how to appeal to your customers
in a technically correct way to your job, then you don't maintain 'you.
make them aware of their need your place in the civilized world. L When you are going out and
intense,

what

which

or you

also

gets to the point where he

say

was
felt by
stomach, and
release of some

the

clothes,

would

cessities; food and liquid, shelter, we are
discussing:
This new
feels, yes, he wants some, he will comfort, sex, health, cleanliness thought is the time urgency fac¬
tor in selling and in buying.
buy some. Until you get him to and transportation.
In
feel that need and want, you do
The first five are pretty much classification number one, in this
not make the sale. The function accepted
by everyone as being rating of human wants, when you
of every salesman is to bring the very vitally necessary to every¬ have very little money to spend
satisfaction of a want to his cus¬ body in life.
Certainly, if you there is quite an urgency in the
tomer.
don't have food and liquid, you spending.
You
have
got
just
How intense is the want for don't keep on living or working or enough money to go out and get
what you have to sell? In reading anything. If you don't have shel¬ something to eat when you get
the
financial
journals, at this ter you might be exposed to the hungry, and you don't have very
point, it appears that your indus¬ elements so that you will lose much money to spend on eating.
try feels there should be a greater your life. If you don't have a cer¬ You are going to buy 40 and 50minimum
of
desire on the part of the public tain
comfort, you cent meals somewhere, and when
for putting their money into in¬ can't live and work, and if we you get there you are probably
There isn't much
vestment securities. So we might didn't have sex we wouldn't con¬ quite hungry.

have

that

not

that what you do? You at what level of human want your
out and you talk about stocks investments will be sold. The first
and bonds and, eventually, the classification concerns basic ne¬

the stimulus

you

automobile.

Isn't

that

you

need which is felt into a want.

person

•

are

You have been eat¬

hurry.

ing fairly regularly.

more.

Maybe

are

away

such

alive.

want, the greater
fy
to that want.

ally, he would probably just take

these:

activity is
motivated purely by hunger. Yet,
if I lift up this ash tray and put
it down again, you would have a

any particular
is our response

Some psychologists be¬

Hunger.
lieve

idea,

are

and the more

If I were to stick a

is based

the satisfaction of our wants
sensitive we are to

upon

why any action is taken by peo¬
ple, then we will have some kind
of a basis to know why people
may buy
There

idea,

motivate

human want.

very

Most of human activity

little bit about

keeping yourself
Now, if you made a little
money,
if you received a
the next thing you would

You

selective.

What are we doing in' this
room, here? Why did we get up in
the morning and go to work? And
ity?

What

crimination becomes a little more

small

be spent

As you earn more money and
raise,
spend go into the third classification
that impels a person
your
money
on
is probably a where you are buying other prod¬
purchase.
:
better room, better food, better ucts, then your purchasing selec¬
In order to sell your securities
shelter, a little more comfort for tion becomes a little bit fussy,
you
have
got to
So, you start out with a stimu¬ intelligently,
we'll say. And when you get into
yourself.
know exactly what buying mo¬
lus that sets up a tension which,
level of buying, then the
These are two categories, the that
impel
your
customers to
in turn, drives us to take some tives
■basic necessities, and the second man who is selling you the prod¬
kind of action that will reduce the commit themselves to make pur¬
one
is when you earn
a
little uct has got to be a little bit more
of
investments.
If
you
tension and bring us back into chases
careful in how he sells you.
more
and
you
can have a few
know exactly what makes a per¬
comfort.
■■■'
As
wants become farther re¬
more basic necessities.
Would you
son do something then you know
Now, the first time we had a
say that you gentlemen are sell¬ moved from basic necessities, the
what to do in order to make them
lecture here, the room was very
ing investments and securities on want becomes a mental anticipa¬
do that. You know how to start
warm.
We did not have the win¬
that second level?
tion of a desirable satisfaction. (;;|r
dows open but during the recess your automobile and get it mov¬
When you are very hungry, you
Now, the third classification is
ing down the road; because you
we opened the windows and ad¬
certain other products or services don't care so much, you simply
know how to move that automo¬
justed ourselves to the tempera¬
which add to comfort, progress, went in and made your purchase.
bile, and if you know exactly
ture of this room.
But the person who is stocking up
what makes people buy invest¬ happiness and entertainment. • If
It should be remembered that
on
a
cellar full of wine, he is
you received still another raise, if
ments, then you will know better
the greater the stimulus is, the
liquid, but his selection
you had a little money left over, buying
how to make sales.
is going to be done quite metic¬
greater the response to it will be,
pow, above these very basic neces¬
We are dealing with the fulfill¬
sities we have been talking about, ulously. He is not buying for an
and, relating all of this to our
ment of want theory, as far as
then normally you would spend immediate and urgent want, he
selling, we find that human ac¬
tivity takes place primarily to selling is concerned—that people your money—and you might get a is buying from a want that is
satisfy our wants. When we be¬ buy things to fulfill the wants radio, you would buy a bottle of anticipated. He is anticipating a
they have. What you do is stimu¬ good-liquor once in a while, you satisfaction that is going to take
come hungry we feel the need for
food. The tension makes us aware late a feeling of want on the part would buy some good cigars, you place later on, Jrom drinking this
of a need for something.1' We have of a prospective buyer. Then you would entertain yourself a little wine.
We have all learned

know the answer to tnat

That

just

buying motive is any

motives. A

again.

well

get

amount of income would

Getting and Keeping Your Customer's Attention
(Continued from page 4)

Thursday, October 27, 1949

FINANCIAL CHRONICLE

a
'

few more necessities and better

special category of an item for
sale.
They differ from product
and service, and also insurance.
Ordinarily, a low-income person
who has money only for basic
necessities, hasn't any money
over

fore,
far
...u_

ones,

then

your

purchasing dis¬

to buy
we

left

securities with—there¬

might conclude that as
low income person,

very

Volume 170

own

work,

concerned,

maybe

work

The person who is making a

little

List of

were

tives.

again, from his

list

work—we

are

■

discussing buying mo¬

that

you

going to give you a

peal

house,
your

As soon as

surplus over the basic neces¬
exists, I would say that a

any

major classifications that we
consider first. There are

lective

pri¬

motives.

buying

buying motive is the rea¬
for making any purchase. It

time

every

you

make

the convenience of doing
with your particular

business

primary buying motives, and se¬

poor

mary

services that

house offers to the customer.

your

the

all

and

son

your

and

securities, and that

com¬

you

not

necessity

spent

for bare

classification three,

into
the

investments

primarily,

person

cation four

fit

and also

who fits into classifi¬
is a prospect for what

sell.

you

desire

the

creation of

make a

particular brand
in

differ frbm

particular

car

stock

other thing on the market,
have to consider their sale
strictly from their relationship to

the

you

the individual buyer.

investment

don't

use

tives.

You

creative

has

then you
buying mo¬

field,

primary
do

need

not

selling job in that case,

simply need to do a selective
There are many people who get,
selling job to have him invest
their basic necessities in life from
you

position where they are
derived from investments.
They

being in
do

not

them

earn

by their own

and therefore, as far as
people are concerned, in¬
vestments and securities provide
their basic necessities, so that to

work,
those

large market in this coun¬

very

their investments, they

buying motives is the emotion¬
al
versus
rational buying mo*

buying motive

rational

would not commonly known

the rent, buy clothes,

eat, pay

ties in with the

Naturally,

major classification

as your

forth,

vidual

gry,

convenience mo¬

"heart,"

the lower cortical section of your

of these mo¬
from the emotional

some

tives ^overlap

Livelihood

that

investments and se
a means of livelihood

best one to use for

back

that particular

customer.

Maybe

customers

just don't

of your
give a darn

some

purities are
[or

great

many

people. They

should not become quite

angry or

There

upset, and yet we allow

ourselves to

become

and when that occurs,

very

direct

relationship

angry,

between these buying motives and

not

basic human needs, that we have

we are

inside

need he has for proper
investment of his money. You act

the stimulus.

believe

salesmen

are

little

older

realize

and

you

stamina that

same

had 15 years ago, and that,
certainly, it is not going to be
increasing, that, somewhere along
the line, help would be a wonder¬
ful thing, and that help
should
come
from what you have done,
yourself, from your savings, in
putting them to work for you.

think of investments,

the

and

because
terrific

you

customer,

your

don't have the

the

spreaders of dissatisfac¬
again. Some of them could be on tion in the world, and that is true.
What you do is to spread dis¬
both lists.
satisfaction with the current cir¬
Every time you make a solicita¬
cumstances.
A
person
who is
tion you have to decide which of
these buying motives would be the going to sell you a television set
list into the rational list, and

you

I feel that

tension

going to be able to keep up the
pace, especially, if you live around
New York City, and you get to

you

to make him

person

hungry, you don't think
When you become hun¬

not

are

When you

their needs.

isn't hard,
selling has

they are making some money for
them. You get along in life, a lit¬
tle bit older and begin to wonder
about how much longer you are

of eating.

brain. You know that most prod¬ about any emotional buying mo¬
that every indi¬
ucts
and services are sold be¬ tive. You've got some really hardcontact, your
boiled buyers. They are only in¬
cause of emotional buying habits,
solicitation, to them, as far as se¬
terested in savings, perhaps, se¬
lection of buying motives in rela¬ not rational buying habits. It is
tion to urgency of need, those not easy for a man to live, con¬ curities, dependability, You have
got to judge your customer ac¬
buying motives have to be indi¬ tinually, by very sane and logical
reasoning. There are lapses, very cording to what moves him to
vidually selected and applied.
frequently, and we live in our
Buying Motives and Basic
Investment As Means of
emotions. We know
very
well
Human Needs

and

the

aware

really

appeal. I am trying to look at this
subject in a very personal way,
right now, and I know that it is
to anybody's benefit if they have
their savings invested somewhere
where they are secure and where

going to buy.

tives.

what you are

proposal.
development step,
.you make him aware of the need
for what you are selling. Remem¬
ber that people are not always

through you and your- tive that the person does not have
company, and also the selection to go to much trouble for hand¬
of the particular securities he is ling of investments, through you.
other

offer and develop his

your

During

that money

..The

launched into

and the benefits that will
to him, if he buys what you

offering.

are

interest in your

surely use that,

you

come

do
think of eating.
too, how long your investment
People do not go around in their
house has been in operation, the
daily lives, thinking of invest¬
prestige of your house, and also ments and securities, unless they
the earnings record of the com¬
happen to be in the business. Just
pany
or
companies that your as the internal tension of a per¬
clients invest in.
' '
son
makes him think of eating,
Ease of
Operation, that again you, as a salesman, must stir up

the higher center of
try your investments and securi¬ appeals to
ties apply also in classifications your reasoning powers, your logi¬
cal thinking. The emotional buy¬
one and two, because unless those
people did receive income from ing motive appeals to what is
even

Durability,

you

development step, which oc¬
when you started to pre¬

sent

ing made can be depended upon.

already
made up his mind that he is go¬
ing to be putting some money into

every

that. Dependability is
one
that you certainly use.
You
build up reliance upon yourself
and upon your house, and you try
to impress upon your customers
that the investments that are be¬

company.

customer

your

never
solicitation without talk¬

about

ing

soon

sale.

curred

probably

You

field.

make

purchase. A selective buying mo¬
tive is the reason for choosing a

;

Because investments

automobile, any automobile, or a
certain stock, any stock. It is the

essentials.

So,

buying

for

motivation

him,

formal presentation, you got
the next step of the sale,

into

the

market also exists for investments

the approach part of the

Savings and Profits, that would
number one buying motive in

sities

pete with all the other producers
for the consumer dollar that is

that you
and, when

sure

attention

his

You have

in his presence.

got to spell out quite carefully the
advantages that will accrue to

had his attention, you started
the opening of your formal can¬
vass.
Now all those steps make

gentlemen probably ap¬

canvass,

should

fairly

you are

you

that

also is

made

secured

two

person

You

the rational side, your
there is a motive

Convenience,

in the second classification here—

market for securities.

(1673) .25

between

buying motives. There are

■

friendly, easy-going relationship
the two of you.

diversified investment programs.

Buying Motives

money

own

Now,

! A

for these extra
quantity and better quality neces¬
sities, and is earning that money,
more

none.

CHRONICLE

FINANCIAL

ing motives, the security of well-

-lousiness?

American

for

There

he is hot in the market for securi¬

ties.

COMMERCIAL

THE

Number 4850

greatest

Something to Sell With
''Terrific

Appeal"

You

gentlemen have something
to sell that has terrific appeal to
the American public,
in

sented

right

to-goodness

would

come

everyone

if it is pre¬
If they

way.

understand the hon¬

made to

are

est

the

benefits
that
them, such as

this

under¬

room

stands right now, as far as

invest¬

dissatisfied with con¬ ments are
concerned, that is, but
ditions at home without that set.
in order to-get them to appre¬
He makes you feel the lack of it.
ciate what satisfactions they can
He rubs into you, quite realistic¬
get you have to do a lot of talk¬
ally, that you friends all have
ing to them. So many people that
television sets now and are quite
I know go in and make a solici¬
happy with them, and you need
tation, and it certainly can't be
one.
He arouses your need, and
called that, it's really just asking
if he is a good salesman he makes
a few questions,
and they expect
you really want that television
to
sell
something just through
set, and in making you want it
that kind of a canvass. That just
he uses the sales presentation. He
doesn't happen,» Selling involves
makes you dissatisfied at having
a
lot more.
no television in your home.

makes you

have

You

to make your cus¬
invest their money

tomers want to

in your

offerings by making them

discussed, a while
subject of interest.
I

the

among

right

us,

now,

ago,

feel,
a mutual
far as the

controlling ourselves from that been talking about. People buy aware of their need, and devel¬ feeling of interest, as
worth
of
the investment
busi¬
rhere are some people in this part of the brain that does ra¬ things to satisfy their needs and oping
their wants into doing
their wants, and the motivation to
ness
is concerned. Now if .your
:ountry
who, as far as their tional thinking ,§nd rational buy¬
something in that direction.
As I
buy derives from their desire to
prospects
and
your
customers
%
knowledge
is
concerned, think ing.
say, they don't go around all the
satisfy these wants. Therefore, the
could have that same feeling, that
Here is a list of buying motives,
time feeling that need, and un¬
they can get money only from
motives that you appeal to are
same mental concept, of the worth
their daily work. They do not classified as emotional of rational;
less someone like yourself stirs
directly related to the very basic
and goodness that can come from
know that what they save from here are the emotional ones:
up their interest, they are not go¬
wants of your customers.
intelligent investment programs,
their daily work can also be put
ing to buy anything, so you con¬
Prestigb, Economic Emulation,
be, for a great many more,

:ould

for them.

work

Any person who
told

should

ings

that

approached and
savings can work

their

Approval of Others, Im¬
Yourself, Protection and
Safety, Labor Saving, Sacrifice

Pride,

has any sav¬

prove

Appeal, Security.

capitalistic set-up,
should be ~ that

for them. In a

ivhen man's own labor

diminishes

then the income
from
savings from
that labor
should make up for his lessened
because,

work
If

age,

income.
man

Dependability,

Ease of

You

talk

often

sell.

about when

wonder
you

invests

his

life, his

are

what

These

time

tie

—

tainly^

you've

see

any

got both lists
the relationship

two of

person Is

them.

Cer¬

interested in

far as his investment
is concerned, to guaran¬
tee the continuance of some of
his basic necessities, to keep him
as

program

gentlemen

what

you

Durability, security

Operation.

have

not

between

Convenience, Savings and Profi t s,

for

there

The rational ones;

the ideal situation

eVery motive" up with basic wants,
but I'think that it is quite simple

buying motives

should appeal to.
selling points to ap¬

you

A widow who is
dependant upon income from in¬
vestments would buy, certainly,
for security rather than profits.

goingtin

life.

personal life, in American busi¬
ness, is there any reason why he
should not invest his savings in

You

There
is no reason
why he shouldn't,
and
yet there are millions of
people in this country who work
for American business, who have
a
prejudice against having their
money work for American busi¬
ness, and I ask you what is the
difference. No difference, but a
lingering prejudice and ignorance

People may buy investments closely to the first level of basic
necessities.
purely from the prestige value.
Your approach to that type of
They like it when their friends
know that they are in the market. customer would be entirely dif¬
Economic emulation, of course, is ferent than a very rich person
keeping up with the Joneses. Your who was in category number four,
neighbors are all in the market, who had a lot of money to spend
on luxuries and his point of view
and why shouldn't you be in the
market? There is a group of peo¬ in going into the investment mar¬
ple who take pride in the fact that ket would be entirely different
they own investments and secur¬ from that of the widow. Then,
ities.
your selection of buying motives
also be
different.
That
I heard a story a while ago would

American business as well?

in'their mind.

They may say, ''But
want to risk my money

don't

in stocks
well,
say,

can

see

peal to those motives, and those
motives will

make

sales for you.

Those

would

very

him

tact

desire

and

that

him how

Then you Show

curities.

offering

your

develop

you

his part to buy some se¬

satisfaction,

would
far as

bring him
this field of

activity is concerned.
In

tain
the

doing that, you employ cer¬
selling points that appeal to
buying motive that you

underlies

that person's

life.

feel
You

determine, immediately, whether
you have to use primary buying
motives, whether you have to do
a

creative selling job, or

just have to do a selective
selling job. Remember that what

doing is trying to get

him

the idea
that you are putting forth, that it
would benefit him, and bring him
lasting1 satisfaction if he would
go along with you in this invest¬

accept and agree upon

ment

program

that you are sug¬

;

gesting.

they certainly would want

along and put their money

into those programs, but you see,
in order to get that kind of men¬
tal

lot of
selling,
appealing to the buying motives
that will really stir a person up,
because they are very closely re¬

acceptance it takes
selling,
and
intelligent

lated

the

very

fundamental

things in life.
I

said, earlier today, that there

othar

thing for sale in this

can
appeal more
closely to the personal gain mo¬
tive of the American public than

whether country

you

you are

I think

that

what you

people have to sell, and
that,
your
selling
should be easier, because we have
been created as personally selfish
beings, in order to continue our
because

existence

were'-not,

this

earth.

would

have

been

wiped out, and therefore, we are
#

develop¬ very much interested in our own
ment part of your sale. You are personal lives and our personal
using a sales story to have, him gains, and if investment salesmen
can
sell close to that instinct, if
accept what you put forth. Now,
remember that a sales solicita¬ you will, and relate your offer¬
tion is meant to sell. It is not an ings to these very fundamental
You

are

now

the

might be interested in
about one person who says he person
quick profits, or that sort of thing,
owns a part of all American busi¬
and basic wants of people, if you
have
risked your
end in itself. It is not a recitation.
and
therefore your selection of
ness because he bought one share
can
arouse
that want in their
whole lite in American business,
And a sales canvass is not made
buying motives for him would be
of every stock on the big board.
minds, then it will not be hard to
and it was
a
pretty good risk,
different than the other type of just to impress the other person
Pride motive.
have them commit themselves to
wasn't? Well, there is no more
with what a good salesman you
■
Improve Yourself, that is one buyer.
your proposal.
risk
when
you
invest
your
are or how much you know about
emotional buying motive that you
Do you remember the saying,
the security market. Your selling
money," and is there? He may
Summary of the Solicitation
gentlemen appeal to every day.
"Think no evil"? That is based on
have gone to work for
solicitation is nothing but a tool to
a com¬
That would be one of your pri¬
Let's have a summary, for a
the principle that if you don't
pany whose success declined and
get an order, and you have got to
mary buying motives.
Protection minute, on the solicitation itself.
think of something you probably
then he leaves that company anu
plan it and use it as such if you
The
first
and Safety, certainly that is most
thing you did when
won't do it. If you get it out of
are going to be successful in this
goes to another, and any person
important in the sale of securities. you came in the door was to in¬
your mind, you will forget about
that buys a stock of a company
business.
troduce yourself.
Labor Saving, a person can in¬
There was the
Again I say that the question it, but if you think about it you
whose success recedes can take crease his income from his invest¬ introduction. Then, there was the
will probably do it.
The same
that you have to answer to your
He can save in his own
setting of the right attitude for
the money from there and put ments.
principle applies in selling, that if
the sale to take
place in, and prospect is this question: "What
labor as he becomes older. Sacri¬
it into another company. What is
you do get a person to think for
fice
Appeal,
many
people buy there was the beginning of a so¬ good is it going to do me?" You quite some time about your pro¬
have got to answer that in a very
the
difference,
whether
you, from
that motive but refuse to ad¬ cial conversation in order to set a
way,
because he is posal. then they will probably do
irself,
work
for
American mit it. And Security is, of course, friendly atmosphere and to make personal
(Continued on page 26)
the buyer believe that there was thinking that question all the time
;iness, or have your earnings one of your most important buy¬

and

bonds."

"Well,

Very

you

v !;.

26 -(1674)

THE

Thursday, October

CHRONICLE

& FINANCIAL

COMMERCIAL

crease

Celling and Keeping
Hie Attention of

Your Customer

which

mists had

turn

the

mind,

their

over

say

interests and farm leaders, through
that it is un¬
prob¬ the Committee-for-the-Nation, fortunate when a nation devalues
its
standard
monetary
unit,
ably had never supposed could pushed that contention with all
ever
take
hold
among
laymen, the resources they could command. whether the necessary result ot
much less be considered seriously
V It was also said that devaluation previous unfortunate policies and

(Continued from page 25)
it; the more they think about it,

and

exports

monetary

never

with equal accuracy

econo¬

and

seen

.V \; .V

Controls
Then there

is the fact that in¬

ternal

price controls

ments

are

they

are

in official circles.

.v:

But, as; though
fever

struck with a
sort of madness,

some

powerful groups of industrial and
agricultural leaders and govern¬

would raise prices; and the War¬
ren
dollar depreciation program

was

into

thrown

was

Oct.

his family and his fu¬
ture, is this investment program.
A
complete
solicitation will

took the position level
so
definitely and closely
the
Treasury,
under
the
country with a weak irre¬ that
had an advan¬ guidance of the late Professor
of
Cornell
tage over a country with a strong Warren
University,
redeemable money and that it was fixed the price of gold on various
necessary to pull down the strong occasions at odd figures lest the
currency to the level of the weak. price level be shaken too much or
Whereas in the 1920's we had not respond as desired.
For ex¬
said, and properly so, that our un¬ ample, on Dec. 1, 1933, the price
of gold was moved to $34.01 per
changed dollar was a stabilizing
factor in a world of great insta¬ ounce from the preceding $33.93
bility, in the early 1930's we re¬ of Nov. 29. As a consequence, the
jest
was
circulated
versed ourselves and took the po¬ following

focus the customer's attention on

sition that

interest to

is of vital

What

ters.

the buyer,

chat

deemable currency

the result of a mis¬

distortions

that Lare

there is some
for devaluation when

excuse

dictable.

'.id,

•

There

that

notion

taken

beginning valid

gear

25, 1933. The price of gold
supposed to control the price

officials

ment

practices

haraly

?••■■•/.

goods

factors of time in

the

But beyond recog¬
nition of the fact that devaluation
misfortune,

with

dict

what the
results

final

and

readjustments
will

cannot pre¬

one

accuracy

any

placing and ex¬
ecuting orders and of producing,
goods ordered; the increased
costs of producing goods because
of

the

higher prices for the im¬
raw materials that enter

ported

be.

the fabricated products in various

Possible Post-Devaluation

proportions.

Conditions
Mention of
devaluation

few

possible post-

conditions

and

re¬

immaterial

wishes

estimate

devaluation

merehand

nation

that

devalues

has

international

trade

the

net results

ample,

servt

Manager
both

and

o i

easteri

westerr

; divisions.

member

A. C. Purkiss

the firm since

If, for

ex¬

as care¬

possible the probable ef¬

each of the

items,

fact

the

would still be that the net of these

estimates would
which

could

liable

guide

not

crude guess

serve

re¬

to what to expect.

The
answer
to
all
this .is
that all exporters and importers,

through
agents,

sales
and
purchasing
will have to do the best

they
the

can by shopping around for
best purchasers and sellers.

The recent devaluations

create

problems, of course, but the pre¬
ceding artificially-maintained and
subsidized currencies also created

Practically every contention was make the best of a bad; situation problems of which the recent de¬
either
completely false or in¬ and reveals that thereafter a valuations are a consequence. Un¬
monetary experts.
They never
volved undesirable consequences.
proper course will be pursued, the
could bring themselves to face the
fortunately,
these
devaluations
The arguments and their falsity opposite results may appear. Gold
were
not the
result of a p-rior
logic of their basic position that,
have generally been forgotten or and capital funds may flow in.
testing of the values of the various
f a depreciated currency is bet¬
not understood. We seem not to
Confidence is a delicate ele¬ currencies in free markets.
A
ter
for a country than an un¬
not to

experienced and recognized

changed

Mr, Purkiss.

whole.

to study

fects of devaluation

will be.

one were

For Walston Hoffman

Syndicate

of*

ex¬

The answer is the same; one can¬
not state with any accuracy what

non-merchandise

one

effects

suffice to suggest ports and imports or on the sowhy we cannot predict conse¬ called invisible items that enter
quences accurately.
the balance of payments, or orn

fully

will also

whether
the

may

sponses

questions of having
available for export, the

Purkiss Heads Div.

Purkiss

pre¬

■

are

not necessary.

"full
employment," it probably
country having a de¬ among monetary economists and
can
increase output and exports
statisticians:
"Question, What is
preciating or depreciated money
that subject.
Answer, it is only by increasing costs.
had the advantage. In short, our the one cent for?
it must export mucn more than
position was to the effect that the for statistical accuracy!"
would have been the case to bal¬
worst currency
Since every monetary economist
was really the
ance
the increased costs of im¬
best, and the best currency really of experience knew, and facts at
ports; and it may set up restric¬
the worst.
the time were proving, that a
tions
on
imports
beyond
the
In our wild embracing of this change in the price of gold had no
Walston, Hoffman & Goodwin, madness, we never settled down close relationship as a causal fac¬ tariff wall erected by the act oi
devaluation.
Restriction of im¬
members of the New York Stock
enough to state clearly just which tor to the price level, they recog¬
Exchange, announce that A. C. of the weak currencies was the nized that they were witnessing ports may decrease exports.
The act of devaluation may be
Purkiss, a general partner, has best or ideal one; therefore one what was probably the greatest
■.' ;■
been named :ould not know precisely what exhibition of
statistical
fakery symptomatic of an irresponsible
;
Manager
of the
our
government had ever government; it may impair confi¬
target
of
depreciation
or that
dence in that government's re¬
'the fir m's
"goodness" in money was.
The foisted upon our people.
Eastern Divi¬ secret of that
spect for a fixed monetary unit;
mystery was osten¬
The devaluationists also insisted
it may drive investment funds and
sion
with
sibly in the hands of the manipu- that devaluation would reduce the
bank deposits to other countries
headquarters
ators who performed as though debt burden, increase our supply
because of lack of confidence. If
in
the
New
they were suddenly enabled to of dollars, and stimulate produc¬
an
York office, 35
intelligent government, which
jommune with some great authority
tion.
*
'
Wall Street.
inspires confidence, devalues to
accessible to the manipulators but
Mr.

govern¬

relatively great today.
These take many forms and create

taking it. In
-order
to
get them to do that
thinking, in order to get them
very much interested in it, you
liave got to give them a lot of
Information by making a com¬
plete solicitation, so that when
you
are
in there talking with
them, then, "this is it," and there
is nothing else, this is it, right
liere, this investment program,
forget everything else, including
the work, on the table there, and
everything but this that he con¬
templates buying. None else mat¬

Closer

exports

Distortions of Internal Price

with accuracy that it is un¬
impede imports. Important export fortunate, so . can one also say
increase

would

tion

(Continued from page 3)
veloped and offered as truths the

decrease

those products.

Devaluation/ Currencies and Related Elements

best

redeemable money,
would be the

currency

laving

value

all,

and

the
one

the

have

taken

back

time

the

check

even

facts

regarding the

ment.

The fact that we devalued

in 1934

as we

did apparently sug¬

contention, pressed so hard then gests to many people that we may
and being hawked about today as do it again.
Secretary Snyder is

is that a new set of
artificial rates has been created

consequence
out

of which

set of

new

prob¬

lems,
associated, with artificial
though it were an unquestionable being forced to say over and.over rates, naturally arises.. This points
1946, has been Manager of its simply gave away its goods.
■Southern California offices with
fact, that devaluation increases that he does not intend to propose to still other adjustments to come
The extent to which we are still
another devaluation.
Many sus¬ because of this new set of artilieadquarters in Los Angeles. His afflicted by the idea, held offi¬ exports and impedes imports.
transfer to New York marks an
A look at the facts should jar pect, fear, or hope for, another ficialities and problems.
cially, that a nation can maintain
The basic fact of the matter iss
organization's step in connection prosperity and increase its stand¬ us into showing more care in get¬ Cripps case of. repeated denial,
■with the firm's expansion pro- ard of
living by giving away its ting our evidence before we ad¬ then sudden devaluation. There that we are dealing with crippled
pram.
One of the largest invest¬ wealth should be apparent to all vance our generalizations in re¬ is considerable distrust of the fu¬ countries that have crippled and
ment houses on the Pacific Coast mature
currencies,
and
those
spect to these matters. Our mer¬ ture dollar price for gold. Some artificial
people.
with
17 offices in
that
chandise exports increased from domestic and foreign holders of facts should be faced. We cannot
region,
Walston, Hoffman & Goodwin en¬ Recent Competition in Devaluation $163,000,000 in February, 1934, to dollars are accumulating gold as proceed intelligently otherwise.
tered the eastern territory Dec. 1,
3943, with the opening of an office
4n

New

York

Wall

The firm recently

Street.

established of¬

fices in Philadelphia and Harris-

gain

would

country

The extent to

most

which it

widely believed that if
devalues

should
In

its

devalue

one

which

still

high of $333,000,000 in October,

consequence

currency
too is illustrated

part

increase of

1937—an

104%/ Fol¬

Distrust in Europe and

tute redeemability on Jan. 1, 1950,
February, 1934, to a high of
$307,000,000 in March, 1937 —an is even more pronounced because
increase of 131%. Then a decline of repeated alterations^ of mone¬
tary standards. Such distrust can
set in.
create a multitude of problems
000 in

by the rapid devaluation
Pa., and Hagerstown, Md.
Early this year an office was following promptly upon that an¬
nounced by England on Sept. 18,
opened in East Orange, N. J.,
and by the clamor for devaluation
foringing the present total of of¬
As an illustration of the basic
which promptly erupted in this
and consequences.
fices to 22. The firm's expansion
country.
We have a chorus 'of monetary principle involved, it is
After
a
nation devalues,
inprogram calls for the opening of
voices singing the same old fal¬ fortunate that the facts happened
sensitivity of demand to price re¬
offices in Pittsburgh and Erie, Pa.,
lacious themes of the early 1930's to be as they were. The principle ductions often reveals itself in re¬
in the near future.
is that provided other things re¬
regarding the virtues of competi¬
spect to various commodities with
Mr.
Purkiss
main the same, devaluation tends
during the past tive
devaluation. Despite the fact
the consequence that there is no
to increase exports and to impede
year was Secretary of the Bond
that, without the slightest valid
increase in their exportation.
Club of Los Angeles, and a mem¬
reason,
our
standard
monetary imports.
Prices of exportable goods may
ber of the Public Relations Com¬
But
unit was amputated 41% in 1934,
every
competent scientist rise in the devaluing country and
mittee of the Los Angeles Stock
the current crop of agitators for in the field knows that such a
their costs to importers may fall
Exchange. He is a former mem¬ airther
devaluation of our dollar statement, with that proviso, is in an endless variety of combina¬
ber of the Executive Committee
points to the approximately thirty merely a scientific device from tions.
For example, as between
Iburg,

■

•

jot the

California

Investment

Group

the

Bankers Association.

amputees

new

mands

Co.,

fiers of the New York
as

entative

mem-

Stock Ex¬

35 Broad

registered

their

main

it cannot be avoid¬
ed, it will come by Thanksgiving,
it will come in two or five years,"
sings this chorus composed of eco¬

repres¬

office

Street, New York City

John V. Garner Joins

WASHINGTON, D. C.—John V.
now

associated

with

Stein Bros. & Boyce, Union Trust

Building.

Mr.

Garner

was

for¬

merly with Goodwyn & Olds and

Eolger, Nolan & Co.

one

works out

that

variables

the many

the

enter

picture.

thing by
our

hope to gain some¬

further depreciation of

understanding

how

justments will operate so exten¬
sively that no human being can
follow them all, and probably not
all the principal ones. He knows
be

counteracting forces

strong

against

from February,

the advocates

the

with

case

the

before

monetary manipulation took hold
of us in 1933-1934 should protect
us somewhat against a repetition
At that time

1937-1938

increase

exports
United

the

in.

set

was

knows

that

nor

predict the net results after

tary

They

sorry

aber¬

commen¬

contended

that

devalua¬

operate

nation devalues its money.
Just,

human intelligence.
to

one

can

summarize

will

case

supply

apparently

may

shift

that

has

been

sold for months to come, sterling

prices have been marked up more
than

dollar

marked

down.

been

Our

Prices for which the demand is

highly inelastic,

as,

efforts

proceed

the
situation would be improved greatly, if our government

best

would

easier,

made

and

general
would

make

and

our

for example,
whiskey

]

re¬

currency

exporters

importers can go where they"

dollars that

;

deemable
will

that

and

may

have the

same

our

with

value in the same

market.

redeemable

tend

force

currency

our

would

government

relinquish its stifling controls and ?
to give private enterprise a free
hand
in foreign trade and
ex- /
change.
This
should provide a
great stimulus to both exports' j
and imports and benefit both usand

other nations.

That

that

the

best

thing,

single

government could do to
improve opportunities for trade in*
the face of the crippled, ampu¬
our

weak currencies with,
people of those foreign'
countries must attempt to produce
tated,

and

which the

and

carry on

their trade.

devaluation of a cur¬
rency
brings new readjustments;
and problems.
It is for this reason, in part, that it is unfortunateEvery

that

tions

must face other devalua¬

abroad.

For

the

United

devalue, as urged bywhile the proper course- j

some,

for it is to institute

the demand for Scotch

Redeemable

States

have

prices

Should Be Made

Our Currency

redeemability^
follyl of theworst kind. Despite this fact, we
have a persistent clamor for de¬

would

valuation

economic

from

gold

mine

inter¬

point

British woolens, may rise by the

ests.

arm and

amount of devaluation and not in¬

welfare of this nation to get tem-

course

amputation of one's

demand

States

ments

that

and

all our

of chinaware, for which

the

forces

the

recession

possibly

gain of 12%

part

the

1934, to the peak

business

can

im¬

all

with the

may

one

was

rising in price 20%

British export to

In some instances, as in

designed to justify

divided by a

may

country.

of currency depreciation and de¬
valuation developed several argu¬

ration that

be
us

ports

now.

British devaluation of 30.5%

precisely what does not and
other 10% gain going to us. But
cannot
happen.
He knows that
counteracting forces and read¬ some other country may give us

that the

currency.

things do not

England and the United States, the

remain the same—that indeed that

misbehaved when the madness of

Stein Bros. & Boyce
is

illiterates, confused people,

and those who

darner

which

and

nomic

change,

some

must be done,

Julius Rowe has joined the firm

Miller

de¬

and

amputate

join these other mone¬
tary cripples in their miseries. "It

Schafer, Miller Adds
Schafer,

abroad

He knows that other

that

[

distrust.

this

elsewhere,
perhaps
Switzerland
lowing October, a decline set in. excepting
others
Imports increased from $133,000,- only, which is scheduled to insti¬
nation

who

would

sacrifice,

the-

Volume

(1675)

Number 4850-

170

porarily higher profits for them¬ and prices for millions of goods
and from others who ap¬ and services which no* human
parently have learned nothing of mind could follow or comprehend.
value regarding the principles in¬ They seem to suppose that they
volved in currency devaluation. can make better decisions than
Bloated prices, arising from the can the millions of buyers and
poison of a depreciated currency, sellers who risk their own money
seem
to be-cbnfused with
real and who cannot afford to make

selves,

wealth and real

purchasing power
in the minds of' many people. v7
Besides the fact that the recent

artificial

This is lunacy

mistakes.

in gov¬

ernment, and the world is paying
a fearful price*for tolerating tnese
so-called planners who are busy

competitive devaluations
will
give rise to unpredictable ruining enterprisers and the econ¬
omies of the world. The planners
consequences, there is the further
fact
that
noone
can
possibly continue to ruin England and they
are
rapidly ruining the United
know what the effect of the de¬
valuations

will

the

so-

called foreign trade or dollar gap.
The common statement

regarding

problem is that temporarily
is being closed by gifts
made by us to Europe. It is sup¬

that
the

States.

onger

posed
future

hoped that in the near
the gap may be closed in

cannot

afford

domestic

cannot

economy

eliminated and foreign trade

exchange
become

The Favorable Outlook

and

investment

be
and

cannot

why all state¬
ments of fundamental truths have

(Continued from page 4)

rolls and farm incomes,
while living costs remain high.
Our paternalistic Administration
ing.

by various peoples of the world to
gain control of the public purse
and to take it from dictators.
act

any

We need to analyze

healthy, in

For Common Stocks

our

far as we
can contribute to these things, un¬
til our currency is made redeem¬
able and the power of the purse is
restored to the people where it
belongs.
Revolutions have been fought

matters.

these

about

giving foreign
the right
against

claims

gold.
The great unsound forces in

in this country to be in¬

effective

their

our

things have been pointed
out ad nauseam and with futile
results.

goods and

exercise

■;o

These

gap

our

lanks and governments

7"'?7'!

.;.

'or

ost

though

upon

us.

lessons are
do not quite

face the fact that our government,
is

well

financial dictator. It is spend¬

ing the people's money without
revealing any worth-while sense

aware

means

are

ministration

antagonistic

But,

similarly deflationary

to reduce the cost of living.

the question oi

increasing purchasing power..
of

Costs

Our economic policy
is defi¬
nitely committed to maintain
prosperity, regardless of means
regardless of costs.
Despite al
denials, past and future, not even
the

indefinite pe¬

which is not overtly
,

business,

because

it has learned that the cooperation

business

necessary

to make

the scheme work.

It is in view of

these

conditions

and

advise

investor

that

Regardless

heavy deficit spending and
gradual inflation under an Ad¬

today,

it.

Now it has become

Prosperity

in for

riod of

asking for price

longer

controls

those

pay

the

prospects

fairly heavily committed in

com¬

For the long-term
is, in my opinion, less risk
in the ownership of equities than
stocks.

mon

there

in dollar

obligations, such as cash,
insurance, government and
high-grade corporate bonds, etc.

life

price of $35 an ounce for golc
responsibility; it is throwing is sancrosanct.
Having spent more The only hope to protect our
their wealth and national
funds against the creeping depre¬
than $300 billion to win the war
The answer is. that our people patrimony as though obsessed and
ciation of the dollar lies in equi¬
are we not justifiad, is it not our
ost
control
ovgr
their j public determined to destroy us; it is
will be found in a high level of
duty to spend "a few billion dol- ties or similar investments.
axing our people into real pov¬
imports relative to our exports. purse when their currency was
ars" to assure- continued peac<
The decision to invest in com¬
With
these basic considerations made irredeemable and that, as erty.
'■
and prosperity?
This policy, this mon stocks is made easier by the
a consequence, our government is
Our economy and private enter¬
in. mind, there appears to be no
fact
that good
line of thought, has great mas*
equities are not
now
the people's boss, not their
prise system are bending and are
evidence, which one can produce,
appeal. It is assured of indefinite high in price. Despite the advance
v;:
-77 7\'7 sadly distorted under this load
that would justify any assertion agent....7
success
at the polls.
It is made of the past four months they are
Let us look at the fact that for¬ and abuse. There always comes a
as to
the probable effects of re¬
possible by the seemingly harm- still selling at conservative levels
eign central banks and govern¬ breaking point for a people in a
cent devaluations on the so-called
in relation to present and prospec¬
ess method of the deferred pay¬
trade or dollar gap.
Apparently ments are in a. different position. case like this. : Some additional
ment plan.
We simply charge the tive earnings and dividend pay¬
all that one can know is that, he They are favored as against our act by the government snaps the
cost and add to our■„ debt., * How
ments.
Prices of most stocks are
people whose money our govern- ast support of the public morale,
'ddes,;h0t know.,. / V 1
ong can we go on like that?
Nor low also in relation to book values
ment. uses without effective re¬ and then the deluge comes.
But helpful steps can be taken,
I was
which almost in any case are far
straint. This is* because our gov¬
indefinitely, to be sure, withou
fearful, when I saw the Presi¬
despite all the/factors which we
And
ernment cannot force .our irre¬ dent's recent demand for heavier completely
wrecking ' our cur¬ below replacement values.
cannot understand, and they will
there are still innumerable stocks
deemable
currency
on
foreign
rency, but it certainly does no
axes, that this,, with the tactics
point in the proper direction; For
of profitable corporations selling
threaten immediate ruin.
As lonj.
central banks and
governments of
organized labor and the irre¬
example, only when irredeemable
as ten years ago or longer, manV
at less than the value of the net
currencies pass at their real value except at a discount. So our gov¬ sponsibility of our vote-buying
ernment stands ready to pay them
quick
assets, with the
plant
in international markets, and re¬
majority of Congress, might be the people believed that the New Deal
thrown in free.
There may be
could not possibly continue wit'
deemable currencies flow freely gold for any,, dollars 1 they may final combination that will topple
lold. Therefore central banks and
setbacks in the market, no doubt,
its deficit spending without caus¬
across
international
boundary
our
economy and people into
governments can exercise a con¬ terrible turmoil.
ing a violent inflation.
But thej especially if prolonged strikes in
lines, with import and export con¬
trol over our public purse denied
were pikers in those days by com¬
the basic industries should dis¬
trols abolished, can the way open
I fear we have run by practi¬
to our own people. Foreign cen¬
parison with the Fair Deal whicl
up to the balancing of supply and
rupt our economy, but I believe
tral banks and governments can cally all the red flags that our is
building upon a debt structure
^demand and end such problems
that they will be merely reactions
reach down through the moun¬ people have been able to wave
six times larger than before the
as
the
sb-called "dollar/ gap."
The big and last one, that the
tain of paper money and deposi
in a major bull market.
war.
7;77 :V ' 7/77- /':/7";7,/ 7:,;
Government restrictions and con¬
people ordinarily employ to bring
trols need to give way to the free slips in our public purse and take such a mad
government to a halt
our
gold reserve to the extent
flow of goods and services, and
is missing.
study of public and business poli¬
It is the ability to de¬
they have claims against it.
prices need to be freely deter¬
mand redemption by a reckless
cy in relation to competition in
Suppose the notion s h o u 1 c
mined in the market place. Mone¬
American industry. Such a study
government of its promises to pay
tary systems need to be estab¬ spread that our government wil
should
seek to re-examine the
All of us had best concentrate
lished
on
monetary; standards devalue the dollar and foreign
relations between industry, broad¬
banks
and
governments on getting that above all else
that can support redeemable cur¬ central
ly conceived as self-regulating
convert their dollars into gold- That is our people's last and only
rencies if prices are to reflect real
through competition, and govern¬
effective device for stopping our
for withdrawal. What a spectacle
values and if production, trade,
Dean Edward S. Mason of the
ment, in order to assess the va¬
Our people would government in its spending anc
and investment are to expand. It that would be!
Harvard Graduate School of Pub¬ lidity of this concept and Jxamine
rush toward Socialism.
Without
is governments and their so-called be compelled'tQ sit helplessly by
lic Administration announced that possible changes in biisTnfcss prac¬
their / irredeemable
paper that, there appears to be no rea
management that have created with
group
of Harvard and M.I.T. tice and government actum which
basis to justify hope that we may
the
chaos in which the world money while the foreign centra
improve the workings of
in some way escape the terrible specialists in the fields of law. could
finds' itself;
and there is little banks swept out ali'rthe gold
government, business and eco¬ the whole system."
disaster towards which we con
prospect that the problems in this against which they could exercise
nomics have begun a study of the
The exploratory studies of the
tinue to rush ufder the leadership
That may not be done
chaos will be solved until govern¬ claims.
monopoly problem in American coming year will consist of three
of an irresponsible government.
ments
return
to
their
proper but it can be done; and that is the
business and government.
parts. First of these is the prepa¬
nature of the monetary system
It is useless to talk about edu¬
spheres of activity.
One of the main concerns of the ration of a set of directions to be
For 16 years, our currency has under which we are attempting'to cating the general public to un¬
study is to discover how much used in projected industry studies.
been redeemable in our statutory operate.
If any one is to be> fa¬ derstand the urgent need for recompetition is attainable and un¬ A part of these directions will be
deemability. They never under¬
monetary unit for central banks vored with the right to demanc
der what arrangements it can be a statement of important elements
and
governments; but all other gold, Uncertainly should be our stand these things. They tend to achieved.
of market structure and business
holders of non-gold dollars have own
people as against foreign demand the very thing that wil"
The project is being financed by | practices.
been denied this privilege.
One central banks and governments.
injure them. They are practically
a grant of $10,000 from the Mer¬
Secondly, five exploratory in¬
result has been multiple quota¬
Our
government and foreign always, in nearly every country rill Foundation for Advancemen' dustry studies will be made. In¬
tions for our non-gold dollars and central banks and governments for paper money and for more anc
of
Financial
Knowledge.
This dustries to be explored have been
more of it.
a heavy penalizing of private en¬
have a b s o 1 u t e control ::of-.our
Foundation is headed by Winthrop selected from mining, manufac¬
terprise. »
Leaders who understand and
people's purse; and our people are
H.
Smith, managing partner of turing and distribution.
Special
There is no valid defense for
helpless.
When
a
government are willing to try to save their the New York firm of Merrill emphasis will be placed on those
this
procedure.
It has arisen takes such power to itself and be¬ country need to band together
Lynch, Pierce, Fenner and Beane goods and services traded in na¬
fundamentally, from the fact that comes the
people's boss, the people and to take their Congressmen
The grant,
Dean Mason said, tional or wide regional markets.
our government
like various for¬ and their nation can be ruined
into private
and deadly-earnes
studies
will
be
oriented
will be used only for exploratory The
eign governments, has wished to and they usually are.
conferences.
The Gold Standard
:jU
research and studies in the coming towards answering questions on
take
possession of the people's
League has been organized so tha ;
Now there is one peaceful way
struc¬
year. He added that a four or five relations between market
public purse and to free itself of
earnest
and patriotic
men
and
to end our pursuit of that course
year program is contemplated if ture, business behavior and eco¬
control by the people as to how
women can go to "work and do the
It is to make the nation's currency
the
exploratory
studies
prove nomic performance.
the people's money shall be used
redeemable and thus restore to job that needs to be done. The fruitful.
Thirdly, an analysis of the con¬
; V,
Under our system of irredeemable
League already has several state
the people their proper contro
Specialists from several fields sent decrees handed down by the
currency,
the
government has
chairmen.
Philip
Le
Boutillier
over their purse.
The alternative
will
participate in the proiect. courts for the industries selected
complete control of the people's
President of Best & Company, is
to that is to continue on to de
Those already named are Dean will be undertaken. The experts
purse and it cannot be held or
the
Chairman for the State of
struction and revolution.
Mason, Professors David F. Ca¬ consider legal and administrative
forced to an accounting.
part by loans and investments for
intermediate
period,
after
which
the
answer
presumably

fallen

ests

are

deaf

ears

.and why pro-

futile,

•

away

Study Monopoly

In Business and

Government

New

Financial

dictatorship

Through

exchange

That is

our

government holds our people in
its grip. Government lending and
give-away institutions encroach
upon and replace private enter¬
prise.
Government lending and
give-away institutions dominate
foreign trade and exchange.

contrbls

government totalitarianism sits at
the boundary lines of practically
every nation, including our own
and
thrusts its destructive anc

choice and

our

face it.

All the

articles about the need for econ

and

omy

dedicated
and

are

all

the

organizations

to economy have been

largely wasted effort. The

government doesn't pay any at
tention to them; it doesn't have to
since it has absolute control over

No one can
government can
ladle out all the money it can lay

the

people's

check

it.

purse.

The

its hands on to -buy

York.

we neec

speeches and

support, and

judgment that if the

United -States is to be saved from
the spenders and

Socialists, it wi

the fighters who wil
by banding together and talking
straight to every, Congressman
force our government to institute
a
redeemable
currency.
The
time has come for lining up and
be done by

going to work. We cannot afford,
these days, to waste time on the
futilities
of
pious and useless

platitudes.
backward it simply prints more money
the
Federal
Reserve
of through
Waddell & Reed Adds
every
nation.
Foreign
traders Banks when it needs more. It has
(Snecial to The Financial Chronicle)"
bought the farmers, organized
have been brought to their knees
KANSAS' CITY, MO.—Waddell
trade and exchange are hopelessly labor, those seeking governmen
&
Reed,<■ Inc., » 1012
Baltimore
snarlediiby bureaucrats who seem employment and -favors, t and
multitude of others. It holds for
Avenue, have added William G.
to suppose that they can manage
Schacher to their staff.
the forces of supply and demand eign support by providing dollars

disturbing
into

the

influence

internal

economy

the
Assistant
Professor
M.
A.
Adelman
of
the M.I.T. Economics Department:
Professor Lincoln Gordon of the
Harvard
Business
School, and
Carl
Kaysen,
a
Junior Fellow
studying in the Economics De¬
partment at Harvard University.
Others are expected to be added
after the project gets under way.

vers

and

Robert R. Bowie of

School;

Law

Harvard

co-ordinate im¬
economic prob¬

questions to be of
portance

with

lems.

"Businessmen,"

Dean

Mason

results of
the
study some guide lines to
assist them in their constant tasks
of formulating and carrying out
industrial
policies.
Economists
will find a definition of workable
said,

"will find in the

competition in terms of technical
study," Dean
institutional structures of markets,
Mason explained, "is an attempt
the behavior of firms as condi¬
to devise standards of acceptable
competition — or if unacceptable, tioned by these structures, and
of

"Focus

the

it applies both in the
economic
performance
in
policy and in
te^mSi Of quality, price, technical
of business; practice.!/- uj. i
progressiveness, profit margin, and

monopoly

—

the

field of public

the

area

continued:

need for a

"There exists

broad-guage,

systematic output."

FINANCIAL

COMMERCIAL &

THE

(1676)

Federal Monetary and
the
international
the dollar will, in my

help

which

status

domestic

opinion, also promote the
welfare of the country.

the situation now
from that exist¬

In this respect

different

far

and continued adherence to
this policy during and since the
war has
resulted in an artificial
try

com¬

inconsistencies

pounded of many

and stands in need of change.

level

permit gold in the natural state
to
be
sold
at
premium prices
within the United States. We per¬

mit,

the ex¬

have permitted,

port of gold manufactures of such
character that they could read¬

deficits of

the

say

United States.

particular importance from

gold policy of the American
Government. The dollar has taken

shall

place of the pound sterling
as the
international currency of
toe world and serves as the basic

serves

toe

the

currency

International

the

value

par

monetary

its

gold

unit is stated in terms of the

dollar.

gold, and in particular
dollar, underlies the
Bretton Woods Agreement, it beSince

toe

gold

tiooves

those

take

meas¬

confi¬
strength and
stability to our dollar. The first
step in this direction is to rein¬
troduce gold redemption and to
will

which

ures

dence

and

promote

give

all

make

our

general, led to a greater ex¬
pansion in bank credit than would
have occurred if short rates had
ing

money

paper

freely convertible into gold coin
the present weight and fine¬

-of

would
^introduction of

At least three advantages

the

from

8tem

gold coin redemption. In the first
place, the nations of the world
would be given added assurance
that we are not likely to devalue
the dollar. Congress has, and of
course, must have the constitu¬
tional right to change the price
of

gold. The existence of gold re¬
demption and gold coin circula¬
tion would,
however, constitute
another
hurdle
to
any
such
change

coins

Gold

Congress.

est

tions occurred,

they

those who oppose a
gold redemption do so
because they fear it will curb the
Many

trol

cheap

which

policy

money

for

past 14 years. The principal
elements in the cheap money pol¬

(1),

are:

rates. This

level

lower

short-term

policy has received its

principal support from the Treas¬
ury
Department, which is pri¬
marily concerned with the prob¬
lem of interest costs

the fed¬

The

cheap money policy re¬
ceived its initial impetus from the

1933

1934.

and

the

second

place,
gold
redemption
would
help to eliminate trading in gold
at
premium prices in various
markets
throughout the world.
Premium prices result from the
limited quantities of gold in those
markets and, on occasion, from

price

gold

and

1933

the

1934

from

$20.67 to $35 an ounce stim¬
ulated increases in the production
of

gold throughout the world and
imports of gold into this country.
It

course,
the gold

factors

not the sole
inflow. Other

was,

cause

involved such

this
the

country

gold stocks and equate
price of gold throughout the

world

$35

itself

would

from

black

fers

uries

to this
to

price,

vast

gold would have

amount of

come

country in the period prior
into

entrance

our

the

war.

if we had not raised
the price of gold, increments to
the gold stock would have been
valued at $20.67 instead of at $35
However,

ounce.

first

The

gold

prewar

increase the
commercial
banks,
to

was

reserves

the

effect of

inflow

not

the

might

accord

people

re¬

sign
were

with

government
The fear of an increase

policies.
in domestic redemption might ac¬
tually have some effect in deter¬
ring the Administration and Con¬
gress from

embarking
spending programs.
The present gold

reckless

policy of the

placed

their

fell

rates

fell

short-

and

below

long-term

recession. Al¬

though these were the reasons
most
frequently mentioned,
doubtless the compelling motive
to

was

keep interest rates on the

low level. The
borrower was in a

position to influence the interest
cost on money borrowed. Sound
financial and fiscal policies were
sacrificed to keep interest costs
on the debt at the lowest possible
figure.

the

ever,

show

same

how¬
failed to

time,

government

similar

concern

towards

other items of cost and total Fed¬

expenditures have remained

unprecedentedly high peace

time level.
Since

the

beginning of the re¬
cession,
November, * 1948,
the
prices of government bonds, by
reason
of
widespread
demand,
have risen above the pegs, and
the

Federal

Reserve

Banks

have

been relieved of the need of giv¬

ing

support

situation

the

led

the

development

'7 7"'""7-

•

A study of

the

ascending

period

reveals

century
curve,

since

that

for

except

1932,

very

the
un¬

usual. Ordinarily short-term rates
were

above

either

equal

were

long-term rates. This is

point which needs particular
phasis

because

now

em¬

gener¬

short-term
rates are normally and character¬
istically lower than
long-term
rates. The record actually shows
the contrary to be the case. As
viewed, therefore, against the ex¬
perience of the past, the prewar
cheap money policy of this coun¬

ally

assumed

that

the

market. This
Open Market

Committee
sales
exchanges of government se¬
curities with primary regard to
the general
business and credit
Open

will be to

with

free4;

enterprise.

situation.

Representing a para¬
phrase of Section 12A (c) of the
Federal Reserve Act, this part of
the statement, in effect, says that
henceforth
the Federal Reserve

Sytem will be governed by the
principles laid down in the Fed¬
eral Reserve Act, implying that
flexibility is to be permitted in
interest

rate

abandon the fetish of

must

and be

par

allow the prices of
bonds to fall below
par.We- must: be prepared
to
prepared

government
allow

cise

^tjie

market

vestors..4

determine

their

permitted to

fluctuations.

exer¬

discretion

own

;T7

v'7

Orthodox fiscal policy has al¬

the

depends not only
of

Federal

but

also

caliber

cials,

itself

ful

constitutes

towards

weapon

within

con¬

policies, but also an
enlargement of the Open Market
Committee to include representa¬

the

Banks,
bank

Federal

Reserve

fixing
of member
requirements
by
and the placing of

reserve

statute
a

all

law,

definite limit

the volume of

Federal Reserve notes which may

collateraled

the

securities

ernment

servative

tives

public

ity

acts

deterrent

interest

crease

flexible

reestablish

will

Bank

give

selves

are probably more closely
in touch with money market and

banking
the

developments

Federal

fixing

Reserve

The

Board.

bank

member

than

reserve

is in¬
tended to eliminate discretionary
control over these requirements
by the Board of Governors of the
Federal
Reserve
System.
The
raising or lowering of member
bank reserve requirements is an
requirements

awkward

statute

and

clumsy instrument
policy and should

of central bank

supplanted by

discount

and

rate

of the re¬

use

changes

the

open-market portfolio of the
Reserve System. Placing a con¬

sued

act

public

unlimited support

must not

is¬

debt

barrier

of the gov¬

ernment securities market

Federal Reserve

amount

notes

the

against
itself

the

Reserve

by the

Banks.

that

assumed

opposed to all intervention in

the

securities mar¬
Federal
Reserve

government

ket

Banks.

the

case

sudden

sharp

declines illustrated by that occur¬

ring in September, 1939, the Fed¬
eral

Reserve

justified
market,
amounts

tions

for

Banks'

would

in intervening
purchasing
of

the

limited

obliga¬
periods. It is

government

limited

wholly unjustifiable and contrary
to

good

banking practice,

how¬

money

markets, essential in a free enter¬
be

Reserve

the

and

rates

the
floating
debt,
the
greater the reluctance. If we are
larger

the floating debt

economy,

Federal

credit

policies. Treasuries are reluctant
to suffer the accompanying in¬

must

greater weight in the decisions of
the Committee to the opinions of
the regional banks, which them¬

the

restrictive

adoption

it¬

of investors,

reqirements

self

prise*

enlargement

maturing

year, now

the

The

amounts to
$58.8 billion. A floating debt of
this size, which is far larger than
that needed to satisfy the liquid¬
one

Open .Market Committee to in¬
clude a representative from each

debt.

The floating debt, which is
defined as all marketable gov¬

power¬

inflation.

danger of

certain

return to gold redemption,

which

treas¬

Attempts to avoid higher rates,:
however, by expanding the vol¬
ume
of credit give rise to the

changes in law- which will give
support to,
foster ; and
bolster
policies divorced from Treasury
influence.
These
comprise
not
only

serious

uries, should rates of interest rise.

offi¬

Reserve
upon

prove a
to
public

may

embarrassment

the

upon

the community. In the
place^ floating debts of

size

large

part of the Federal Reserve Sys¬
tem

;for

gers

second

country.

development
independent spirit on the

7 for

ing debts are usually lodged with
commercial banking systems and
hence involve inflationary dan¬

Needless to say the
cf

levels.;: The

this; emphasis are
twofold. In the first place, float¬

the volume and maturity of the
public debt which they purchase
They must be free from
Treasury control and be guided
solely
by
those
considerations
which they feel are in the best
interests of

Wartime4' peak

reasons

and sell.

Market

direct purchases,

and

future

stitutes; 4 about 61 %
al
bearing debt;2A^^iin(Structjvft, policy of debt Tnofitoa^ment
should keep three goals constant¬
ly in mind: (1) the reduction of
the floating debt/ (2) the better
spacing and extension of debt ma¬
turities, and (3) the placing of
the debt-to the; greatest extent
possible
with - permanent
in¬

interest

banking- and to have money and
capital markets freed of Treasury
domination, we must- abandon a
pegged interest curve. Pegged in¬
terest-rates are not - compatible

the structure of in¬
terest rates back to the beginning

interest

to foster

to continue

are

would

structure

became

pol¬

future

private enterprise in commercial

policy, which is couched in very
ambiguous terms and is difficult
to
interpret. The first part de¬
clares that henceforth the policy

The

contribute

"prosperity
and
strengthen the private enterprise
system in banking and finance.
A
long-run program of debt
management concerns •' primarily
the marketable debt, which .con¬
stable

icy, the statement of June 28 can
be interpreted to mean all things
to all people.
>: *
7 ;

ascending

;

well

American

loan demand,

into

the

will

combination

Reserve

Federal

one.-.

ment. An increase in domestic

the

economy

Federal

servative limit

treas¬

facilitate

price of the

cause

our

curve

management fit into a general
pattern. Each separately and all

independence on
System in

the

System to issue on June 28, 1949,
a
statement
concerning
future

thus

and

decline in the

ment

government bonds at some future
time threaten to break par. Far
from conferring

and
credit
policies.
redemption, the abandon¬
of a: pegged interest rate
and sound policies of debt

Gold

prices of

in the market should the

Committee of the Federal Reserve

rates.

permit the American
people, if they so desired, to voice
their disapproval of the monetary
or fiscal policies of their govern¬

that

rates

would

demption

interest

term

cof¬

international trade and exchange.
In the third place, gold redemp¬
tion

gold

would

banks

newly acquired funds in govern¬
ment
securities, particularly in
short-term obligations. The level

the

banks

thus

prices of

government obligations, but none
carried conviction. It was alleged

eral

divert

markets

central

and

This

ounce.

help

A number of reasons were cited

for the need to peg the

government

increase

commercial

available

Corporation, must stand ready 10
surplus on the market.

and political difficulties
without

currency

In the absence of

proportions from
would. add to the

the

absorb any

public debt

vision in the price of gold in the

modest

particular price, whether it
be the price of government bonds
or
of potatoes, the agency doing
the pegging, the Federal Reserve
Banks or the Commodity Credit

that

monetary

bonds will be con¬
This declaration could be

interpreted to mean that the Fed¬
eral Reserve Banks will intervene

amounts

peg a

the

were

United

fairly

the

offered

widespread encashment of
redemption obligations, en¬
gender lack of confidence in our
financial institutions and plunge

ministration. The increase

the expectation of an upward re¬

con¬

long-term bonds below par would

dollar

placing them in possession of a
greater volume of loanable funds.

States. A gold outflow

real

early days of the Roosevelt Ad¬

the

circulation

people might well voice vigorous
opposition to such action, familiar
as they are with the implications
and results of the gold policies

System

the

devaluation

American

meant

market. When decision is taken to

low level of longrates, and (2), a

interest

term

still

tinued.

from

any

man¬

Banks must be

rela¬

purchase govern¬

maturities

public debt

agement represents the final step
in
the
development
of
sound

ways stressed1 the. importance of
reductions in J the4- floating debt

Federal Reserve Banks
to

Constructive

securities market

and the confidence of investors

terest rates. The Federal Reserve

portfolio. Of neces¬

securities

ment
and

the

icy

the

would have

has

been followed in this country

its

over

sity,

any

Debt Management

maintaining orderly conditions in
the government

peg

both the level and structure of in¬

.'r,

obligations

exercise

not

obligations at

Ranks to
government
particular price.

Reserve
to

minor

that the Federal Reserve
could

return

the

tively rigid interest rate curve on

;

ready

the whole

The decision to maintain a

na¬

;

but

relatively
7;7 A

internationalCurrency. government
Policy

duripg

were

character.

tional and!

Interest Rate

used

curve

the Treasury and the Fed¬
eral
Reserve
System, following
the conclusion of hostilities, de¬
cided to continue to use it. As
time went on certain modifica¬

of Western Europe. Even

the

rate

war,

of the dollar

would have to be withdrawn from
and

in the post-war period.
abandoning the inter¬

the status

Instead of

as a

The wartime mistake was com¬

eral debt.

ness.

shape.4

pounded

This bill de¬
first and
essential step towards improving
support

were

zontal in

with the gold dollar.
your

and if

the war

curve

parity

levels dur¬
the interest
nearly hori¬

raised to higher

been

the

maintained

Monetary Fund. The quota of each
member nation in the Fund and
the

short-term

Treasury to mint and

international point of view is

induced the
heavily on
obligations in financ¬
It

rely

ing its deficits. It provoked spec¬
ulation in the public debt and,

Secretary of the
issue gold
coins, and by directing that all
other money of the United States
by causing

Policy

Gold

period was a

war

mistake.

major

stand

government

sharply ascending

the

Government

of 1934,

of the Gold Reserve Act

use

interest rate curve to finance the

time of the
Civil War or of the bimetallic ily be converted into gold bars
controversy
of the 1890's.
In abroad. Although we permit the
free exportation of gold for mone¬
t>oth
periods the dollar was
essentially
a
local currency. tary purposes to foreign govern¬
ments and central banks, we do
The inflation of the Civil War and
however, permit our own
the tribulations of Cleveland with not,
citizens to obtain gold freely at
toe gold standard were affairs of
£reat domestic importance but of $35 an ounce.
The Reed Bill, introduced into
cio
great
foreign
significance.
I4ow, however, the monetary andj the House of Representatives on
credit
policies adopted by this March 7, 1949, restores the right
country influence economic action of American citizens to own gold
throughout the entire world. Two and gold coins and reintroduces
world wars have shifted the bal¬ the gold coin standard. It does
ance
of economic power to the this by providing for the repeal
ing,

.'7

rates.
The

interest

structure

and

the

for

ever,

weakened - by the
luauiapjjs
aqj
jo
laed puooas
which declares that the policy of
immediately

Credit Policies
is

Government

American

however,

conclusion,

This

(Continued from first page)
ternational currency. Policies

Thursday, October '27, 1949

CHRONICLE

reduced, either through

repayment

through refinancing

into longer-term issues.

Closely related to the problem
of

the

space

floating debt, is the need
and to extend properly
marketable

maturities of the

the

debt.

turities

call

first

dates,

ma¬

small

relatively

are

1953, 1954 and 1958 and no issues
callable

are

This

issues

new

these

the

1957

and

1961.

suggests that the maturities
five

should
years

and

placed
in

also

period beyond 1967 which is

devoid

of any obligations reach¬
ing first call dates. As a possibleprogram for the next few years
it is suggested that the Treasury
refinance a major part of the out¬
standing volume of Treasury bills
and

certificates

refinance

and

other

maturing debt by issuing
obligations maturing in the years
listed and also by issuing very
long-term obligations with per¬
haps a 40-year maturity and a
higher than that prevail¬
ing on any obligation now out¬
standing.
Reduction of the floating debt
and a better spacing of debt ma¬
turities must be accompanied by
coupon

simultaneous
total

debt.

continue
cal

policy

following
This

reduction

This

the

should

country

adhere to its histori¬

retirement

debt

major

each

conflict.

policy of debt reduction has

justified
served
ment

itself

the
and

borrowings
gency.

for

credit
has

Insofar

has

of the

pre¬

govern¬

facilitated

periods
as

later
emer¬

possibly

debt

Volume 170

Number 4850

<•

retirement should be made

THE

COMMERCIAL

FINANCIAL CHRONICLE

(1677)

tegral part of budgetary planning.
A net reduction in debt means

$5.57 recorded

The State of Trade and

of 13.9%

that

budgetary revenues
must
:; \
(Continued from page 5)
budgetary expenditures. tons of
steel production. This week its effects were
beginning to
budgetary
surplus ' results reach
into every home, office and factory in the
country, even threat¬
which can be applied to debt re¬
ening the success of America's cold war with the Soviet.
duction, and in particular, to the
v i
Nor will the consumers who have been shutting down
right and
floating debt. Such a surplus must
left for lack of steel be able to start up as soon as the steel strike
be planned and budgeted in all
ends. Few, however, are completely out of steel, "The Iron
Age" adds.
years but those of severe depres¬
sion. The fact that we are now They have run out of certain sizes, gages and types. Reopening will
not hinge on rebuilding
complete inventories but on replacing the
experiencing a budgetary deficit
short items to bring stocks into some sort of balance.
Some will be
instead of surplus at a time of
able to start up in a week, many in two and a few
may take longer.
relatively high level activity and
;;
The auto industry is producing cars right now on borrowed steel.
high national income is a serious
If the steel strike ends
indictment of our management of
today, auto plants would still have to shut

week earlier.' The ..current level represents

from the $6.48 of a year ago.;
COMMODITY PRICE

WHOLESALE

exceed

EASINESS

CONTINUED

The

the federal finances and calls for

debt

remarks

confined

the

public

have

management

been

far

marketable

debt, I should like to make pass¬
ing reference to non-marketable

obligations.

The

non-marketable

debt includes the

redemption ob¬

same

trust

Steelmaking
of

gross ton.

instrument.

debt

On the

INDEX AFFECTED

FARM

interest rate

curve

"the

They

interest

rate

companies

the

duration

are

the

where
of

week, but
lifted

This

week's

,yV;

;

operating rate is

year ago

98.9% apd 1,782,600 tons, and for the

redemption
herent

would

con¬

weaknesses

in¬

redemption obligations
that further is¬

suggest

of the. Series F and G bonds

sues

in.

the

discontinued
bonds

and

Tax

that

Series

Savings Notes

freight for the week ended Oct. 15, 1949,

was affected
by widespread strikes in the coal and steel in¬
dustries totaled 583,913
cars, according to the Association of Ameri¬
can Railroads.
This was an increase of 9,685 cars, or 1.7% above the

be issued only in response to nor¬

them

demand.

the

far

possible

Treasury should endeavor to

meet investors'

ernment

demands ior gov¬

obligations

marketable

issuing

securities.

freight loadings in the week ended Oct. 15. They
to be quite so high.
They said, however, that
probably remain about the same in all categories for
weeks, except for miscellaneous loadings, where the
ixpecied to reduce movements of finished goods.

probably continue at their

what

in the

ELECTRIC

debt

also

the

Treasury

discontinue

should

issuance

the

securities.

During the
ownership
were imposed
on various obliga¬
tions in the efforts to keep the
longer securities out of the hands
restrictions

war

■of the

banks and thus to restrain

the expansion of commercial bank

credit.

Restrictions
placed,
ownership have had the

debt

fortunate

result

on
un¬

promoting
obli¬
gations and uneconomic shifts in
speculation

government

ownership. Once the interest rate
curve is set free, compartmentalization of the debt will not be

quired

banks

prevent

from

maturities.
will

Dictates
them

cause

ket,

the

commercial

purchasing

maturities. In

re¬

longer

prudence
buy shorter

free money-mar¬

compartmentalizes

debt

Itself.

interest

debt

policies

legs

the

Gold

form

triangle

federal

and

added

foreign

will not

devalue

assurance

that

nations
the

public
the three

credit
policies.
redemption is necessary to

monetary

give

and

dollar, to eliminate premium

prices

world

and

voice their

the

permit the Ameri¬

if they

people,

can

throughout

gold
to

desire, to

disapproval of

mone¬

vehicle

146,566

units

rates

the Reserve Banks

(revised)

in' the

combat

exercise

flexibility

necessary

to be able

are

credit

make

constructive

the

of
the

adoption

policies.

such

all

currency.

and

best

V ™

point,"

and

output for the current week was made up of 119,660
18,072 trucks built in the U. S. and 5,192 cars and 2,208
trucks in Canada.
>;

Commercial and industrial failures increased to 181 in the week
ended Oct. 20 from 172 in the preceding
week, Dun & Bradstreet, Inc.,

Casualties

reports.

considerably

were

pos¬

numerous

comparable weeks of 1948 and 1947 when 124 and 75

respectively.

Despite this rise, failures continued
level of 277 in the similar week of 1939.(

prewar

Wholesaling
week's

and

construction

Declines
-

All

the

were

rule

four

England
was

retail

other

reported

failed

below

principally for
were almost

trade

and

than twice

the previous week.

South

the
the
1

the
un¬

commercial

industry and trade groups, except commercial services,
a year ago with the most noticeable rise oc¬

year ago.

the

concerns

well
,

failures than

curring in construction which had

accounted

than

increase, while manufacturing casualties

changed.

many

failures

reported

increase in casualties in

This increase offset the declines which occurred

regions during the week.
failures

than

last

All

areas

except

New

the increase from
sharpest in the Middle Atlantic, East North Central and

Atlantic

FOOD

year;

States.

increased

FIRMER TREND

Although movements

preliminary estimate by
about 695,000 ; bales, as*

SOMEWHAT UNDER
>

retail

sales

the

period*

industrial

some

response

areas were

partially

Fall

numerous

pro¬

the

seasonal

moderately below that of
;

substantial demand for Fall apparel*

interest

was

Winter

unusually

warm

merchandising
weather

was

some¬

parts of

many

country.
wear

declined

than the

demand
'

coats.

Consumers bought

slightly less food the past week than in the

week.; The demand for canned food, especially fruit,
at a high level.
Interest in fresh vegetables and
dairy products declined moderately.
The purchasing of meat, espe¬
cially the less expensive cuts, was sustained close to the high level
remained .steady

week

volume

There

ago.

and

coffee

was

noticeable

rise

the

dolIaK

retail

cocoa.

of home furnishings as*
slightly below the level foa?
the similar period a year ago.
Television equipment and housewares
were
large selling items. The interest in bedroom furniture rose
appreciably following numerous promotions.
Total retail volume in the period ended on Wednesday of last
week was estimated to be from 8 to 12% below last year's level.
Regional estimates varied from the levels of a year ago by the fol¬
lowing percentages: t
*
i J-

week;

sold

about

New

the

same

volume

total sales this week were

England and Pacific Coast«—4 to —8; East and

Mid¬

west —10 to —14; South —6 to —10; Northwest —3 to —7; and

Southwest —8 to —12.

;

slackened pace

of wholesale commitments remained

year

in the week, but at a*

in comparison with recent weeks.

The dollar volume
moderately below the high level

ago.

Reflecting faltering retail sales in

some areas,

wholesale apparel

orders leveled off last week with some cancellations reported.

Department store sales on a country-wide basis, as taken frorrv
the Federal Reserve Board's index for the week ended Oct. 15,

1949*
of last year. > In the pre¬
ceding week a decrease of 11% (revised) was registered below the
like week of 1948. For the four weeks ended Oct. 15, 1949, sales regis¬
tered a decrease of 10% from the corresponding period a year ag^
decreased

13%

and for the year

from the like period

to date a decline of 6%.

;

Retail trade in New York last week showed little improve¬

ment from the like period

which

were

year ago

due to high temperatures,

not conducive to the sale of seasonal goods.

Federal Reserve Board's index, department
for the weekly period to Oct. 15, 1949,
decreased by 18% from the same period last year.
In the preceding'
week a decrease of 11% was registered below the similar week of
1948.
For the four weeks ended Oct. 15, 1949, a decrease of 12%>
was renovted under that of last year.
For the year to date volumeAccording

the

store sales in New York City

decreased

by 8%.

NOTE—On

another page of this

issue the reader will find the-

comprehensive coverage of business and industrial statistics
showing the latest week, previous week, latest month, previous year,
etc., comparisons for determining the week-to-week trends of con¬
most

were

mixed, there

was

firmer trend in

leading food items the past week which outweighed continued
in others and the Dun & Bradstreet wholesale food price
for Oct. 18 rose
slightly to $5.58, from the three-year low of

easiness

well,..«

dip in: total

consumer

PRICES IVDEX SHOWS

LATEST WEEK

index

moderate

The demand for women's

BUSINESS FAILURES ADVANCE ABOVE LIKE WEEKS OF 1948-47

Wholesale order volume continued to rise

total

and

cars

international

The

policies

dollar the

domestic

held

Ward's stated that Chevrolet is expected to be the first General
Motors passenger car section to be cut back on account of the steel

some

sible

Canada

and

units compared with

worker, as steel stock¬
Ward's reported. "Even with
coal strikes next week, industry-wide
expected until production lines are re-stocked."

steel

shutdowns could be

1948

for

monetary,

purpose
to

and

degree

debt management is

prerequisite
sound: 1

real

any

control.

policy of

inflations

future

States

145,132

in the previous period.

The Middle Atlantic States
to

United

estimated

piles melt below the danger
settlement

had

interest

"A bleak Christmas faces the automotive

services.

production

AGO.

YEAR

buying of luxury items in

Retailers

tary or fiscal policies of the gov¬
of

was

for men's suits and

last

According to "Ward's Automotive Reports" for the past week,

fact that daily domestic*

totaled

Exchange,

the

week ended Oct. 23, 1948, but 454,061,000 kwh. in excess of the
output reported for the corresponding period two years ago.

steady and amounted

Cotton

what hampered by

Ihe

motor

steadier tone, aided*

Wednesday of last week with consumer spending some¬
that of the corresponding week a year ago, according
& Bradstreet, Inc., in its review of trade.
Noticeable declines

but

Electrical production for the third time since the week of Aug. 3.
showed a decrease when compared with the
corresponding
period in 1948. The amount of electrical energy distributed by the
electric light and power industry for the week ended Oct. 22 was
estimated at 5,417,877,000 kwh., according to the Edison Electric In¬
stitute.
This represented a decrease of 62,858,000 kwh. under the
preceding week, 121,008,000 kwh. lower than the figure reported for

ernment.

A return

York

There continued to be

LEVEL

AUTO PRODUCTION STEADY THE PAST WEEK

was the

;,
apparel volume last week
preceding week.- ' '

the

1946

The

rate

all

1948

UNDER

recently,-the market showed

^ Retail

strike.

Summary
Gold,

CONTINUES

■.

producing areas.

motions in other localities.

strike is

FOR THIRD WEEK

restricted

PRODUCTION

offset

change Irr grain shipments for the remainder of the month,

able

Fall

below

to Dun

Coal loadings will

meeting
investors'
needs
through the issuance of market¬

issued

There

low level, and rail men foresee little

same

from

VOLUME

ended

two

steel

the continued heavy
!

hand, choice fed steers advanced to new highs for
receipts again fell below trade requirements. Lard prices*

news

New

;

didn't expect
loadings will
the

low ground since OP A controls were

new

1946, Influenced by

the 9,685-car increase

over

mal

surprise

quite active last-

slow pace.

RETAIL AND WHOLESALE TRADE HOLDS

preceding week. It presented, however, a decrease of 329,044 cars, or
36% below the corresponding week in 1948, and a decrease of
370,236
cars; or 38.8% under the similar period in 1947.
Railroad officials expressed

corn.

were

against 664,000 during August and 739,000 in September last year..
The September consumption was equal to approximately 32,000 balesp
per working day.
This indicated a better than seasonal gain oveir
the daily average for August of 28,900 bales, and compared with*
34,000 in September, 1948. '
"
>r
.
*
■

AND STEEL

STRIKES RECEDE FURTHER IN LATEST WEEK
revenue

September consumption, according to
the

which

obligations.

sequence

bookings continued at

October,

new

bakery iiours

corn market*
sharply in the face

consumption of the, staple, appeared to-be holding up

week in 1940, high¬

Loadings of

wheat

^ ^ Another supporting factor

it stood at

est prewar year at 1,281,210 tons.

CARLGADINGS AFFECTED BY WIDESPREAD COAL

nam

off

by moderate mill buying ^and hedging against sales Of. cotton goodR.

because

curve

fell

Cotton prices continued to move in a narrow range with finalquotations down slightly from those of a week ago. Following sons©?
liquidation resulting from the larger-than-expected government crap»
forecast

and production amounted to 1,559,600 tons; a

Treasury officials fear that higher
rates on marketable obligations
will cause a heavy encashment of

interests

elevator

of live hogs to Western markets,

able eroo

average

*>n

new

j.'

held quite steady, aided by liberal hedging against sales to the
government.
-•N':'' v."
;
Coffee and cocoa prices continued to rise, due largely to unfavor¬

equivalent to

166,000 tons of
ingots and castings for the entire industry compared to
172,000 tons one week ago. A month ago the rate was
84.6%

freeze

unsettled and prices worked

steel

•

from

the year as

of $19.33 a ton,

j,.;'-'M' c»:.\ -.V,'..

from the preceding week.

cor3-

On the other

94% of the
steel-making capacity of the industry will be 9.0% of capacity
for the week beginning Oct. 24,
1949, a decline of 0.3 of a point
-

18,

the

.:.v>

Hog values sank to

recovery

ton this week to $25.58

•

increased movement of both old and

are

Oct.

especially pronounced in the cash

was

demand

consequence, "The Iron

!;V

crops,

run

the 1949 low

a year ago.

;j'.i The decline

241.71

farm price legislation and the expanding movement of new

over

beginning to feel the effects

consumer

finished

steadily lower during the week, reflecting continued uncertainty

now

index

week earlier, and with 274.13

Grain markets continued to be

level, states this trade authority, the
and

daily wholesale commodity price indess
as a result of continued easiness*

The

with 241.94

responding date

xhe American Iron and Steel Institute announced this week
that the operating rate of steel companies having

one

marketable

tend

inventories

and

COMMODITIES

lower the past week

commodities.

farm

compared

hand, they constitute-a- demand
liability for the Treasury and, on
the other, they tend to freeze the
obligations.

steel

This is still well above

set late in June.

issued

lic

low

prices

scrap

90% cutback in

their

buying. As
Age" steel scrap composite has dropped 920

accounts.

Redemption obligations,
during the war to protect
the investor against later possible
capital loss, are not a good pub¬

difficult;

intensity of the rush to recover
period is going to be lengthened.

various

build

Every day the strike continues will make

pulled down to the

issues

the

date

operating level.

ligations,
consisting; mostly
of
savings bonds, and .the special
in

future

some

inventory comeback

per

held

proper

rectification.
my

down

Bradstreet

Dun

moved slightly

dro£*

Although

in¬

"{■

immediate

«,#

ditions, by referring to "Indications of Current Business Activity,'*
a regular feature in every Thursday's issue of the "Chronicle."
.
,.

COMMERCIAL & FINANCIAL

THE

(1678)

bonds existed in re¬ duce the results so desperately
the market for equity .wanteds The way to release en¬
securities has not been encour¬ ergy and inject a dynamic qualiaging. The result was a substan¬ ity into investing is by the kind
for

demand

and

ceipts.

■;

that

quoting

merely

Otherwise

that, having taken the first step;
the second, the third; and so on
down
the
line
are
inevitable.

re¬

that, and I quote, "A parent

having control over a
of companies, including,

ization,

better able to

vantageous

purely

local

terms than a
undertaking whose

offer

had'

imposed

which

companies—I

controls

"a number of

—

the effect of

have had

...

happened?

ment

the report and the Labor Govern¬

nationalized.

The

paid in

were

the

situation
ceived

uncertainties of

electric

and

fallen

the

have

also
rea¬

fact

vestors

obtained

return

than

they

sold

ceived,

smaller

formerly re¬
their govern¬
this

cite

perience for two

(1) It

much

securities.

since in¬

that,

they

ment

the

One of the

price.

was

sons

securities

ex¬

reasons:

shows

the

inevitable

tendency, unless checked by pub¬
lic

opinion, toward over-central¬
Having hampered the in¬
dustry in the first instance, the

ization.

remedy

recommended

com¬

was

plete elimination of private own¬

(2) The welfare state leads to
the

plan made

deal

with

intended

was

investors

fairly, but

the government did not admit the

injury
and

steep

cut

income

emphasized the maintenance
values.
But
capital

.capital

values
of

melted

the flood
issues suc¬

away

government

new

ceeded

another

one

and

investors

liquidated in an attempt to#im¬
prove their income.
The damage
done cannot be undone.

The eggs

cannot be unscrambled.

I, for
in

imagine Clem¬

one, cannot

ent Attlee

the

tators.

Sir

role

Stafford

Cripps

continental

dic¬

I believe

they are sincere
men
with good intentions.
The
false logic of their premises sim¬
ply has the most illogical conse¬
An

quences.

is behind

industry

equipment,

is
clogged with
agreements that stifle competition,
a

labor

union

philosophy which
restrictive, and a tax
system which admittedly deadens

initiative—and

the

recommenda¬

the

in taxes

These conditions

met.

ordinary

talk¬

long time I have been

through

problem

the

solve

changes in the Federal tax struc¬

through a
corporation.

not

details

the
six

with
Corporation's

the

months

after

thorization.
tion

was

first

the

The $500,000

au¬

limita¬

and the ma¬

eliminated

turity limitation was extended to
years,
later to be removed
entirely.
Now, in the mid-thir¬

ten

economic
and

for

machine

there

was

was
some

legislation

character. The emerg¬

has become only
Yet, in 1947,. a change

with

respect
credit

RFC

borrowers

to
not

lending

commented

memory.

the

government
I have not

Hoover Com¬

recommendation

that

the

guarantee loans to busi¬
enterprises made by finan¬
institutions. > I indorse this

ized

expansion, which began less than

ness

cial

proposal. I indorse it for what it i£
worth

constructive measure,

limited value

but

supplying

Borrowed

means

enterprise

funds

one

are

soundest,

way

move

most

into

dearth of savings and, now

in business
subsiding,, I, for one, do not

the
be

available

believe

it could

when

American

indefinitely

investors

committed

are

shel¬

tain credit from other

expansion program, I noted with
great interest this- observation,
and I- quote: "While a fairly good

sources

"reasonable terms," which

bodied
»

in
i

the

present

is em¬
law. The

reading

the

advance

sum¬

of the Association's report
the public utility
industry's

mary
on

extraordinary
permit. For¬

changes can
activate

strategic

tunately,
made

will

that

help

stagnant pools of existing funds
energize current savings. But

and

these

changes cannot wait.

Equity for equity capital is the
slogan
in this venture
capital
campaign. I ask that ycu join
,

with

in the interest of the na¬

well-being.

continued

tion's

accumulates
holdings, pays

government

surplus

subsidies

federal

out

deficits,

imposes
production allot¬
ments and marketing quotas.

and

happy either when

not

government slipping back into

see

deficits
riod

when

of life in a pe¬
production and em¬
way

page

port the economy if less prosper¬
ous

times

overtake

sum,

march

the

uneasy

*■

us.

•

maintain

economic

progress,

are

individually
and. as:
groups, in private business and in
politics; - display
industry, 1 pru¬
dence, and self-discipline, recog¬
nize that we can't get more out of
? the* economic
system than we put
in, that collective bargaining in
good faith and on solid facts; is
must,

we.'

the

road

tion

monetary

distribu¬

workable

total

that

product,- and

and

tricks have

fiscal

are
high, instead
of
no power of magic but are
putting its-fiscal house in order
and husbanding reserves to sup- jpery road to misery.

ployment

slip-

Expresses Faith in Private and Public Agencies
And Opposes Theory of Perpetual Boom
In

panel discussion of the topic "Can

Business and Government

Maintain Prosperity," held by the Associate Member-,

Get Together to

New York City, Friday,

ship of the New School for Social Research in

21, Dr. Nourse stated his confidence in "Flexibility" rather than
in the rigidities of planning.
• <• ■ ®
rrr-r?Trrr*
-rr
'X ..
"Let us look at the last two
complementary action of private
and public agencies of business,
words of the question, the words

Oct.

define

the objective. Does
[prosperity] mean as¬
by formal and effective con¬

which

It>

an#

non-depression

means

'maintain'

anti-waste through idle plant

sure

jobless workers; not

"or

the

said

trols?"

does

would

Economic

mean

flow

Chief,

the

natural

result

properly designed institutions
and
intelligent
and
self-disci¬

practices?
Personally, I
confidence in the flex¬

second

method

rather

than

the

rigidities of implemented
planning. The Employment Act
of 1946 is devoted to the goal of
sustained high

production and: the
consumption that goes

abundant
with it.

boom

But this does not imply

chronic

"To

that prosperity

nical

possibilities

defines my con¬
prosperity," Dr. Nourse

largely

continued.

"I take it in the prac¬

tical

that

tain

private

agencies so. to conduct their mu~
tually related activities that we
have sustained high levels,
production and, hence, of con¬
sumption. -1 do not
think this

may

prosperity could, in a. dynamic
world, be kept to any unvarying
theoretical maximum—a perpet-,
ual

sprint.

But

readjustment

sense

for

the

sions

excesses

wasteful

believe
the
of booms and

paralysis of depres¬

be reduced to moderate-

can

ups

and downs."

waste of pro¬

ductive power."

business agencies and government

safeguard it against serious lapses

"This

believe it is

entirely within the range of tech¬

weakening

cept

an#
perpetual

inflation.

summarize, I

maintaining prosperity at a sus¬
tained
peak
level.
Rather,
it
means developing "know-how" to
into depression and

investments.

tered
In

ers

ible

effective

that fears of a tailspin
are

place

money

made
requirement
was

price

when I see farm¬
demanding stimulative, prices

-I

plined

equities is by removing the ob¬
structions from the Federal Gov¬
ernment's tax structure.
These
is

and
making.

thing,

ownership capital another.
The

their, theories, of

ing

funds.

qbtained from ordinary sources at
prevailing rates. The Corporation
was empowered to make loans to
any borrower who could not ob¬

happy.

sources

I do not intend to tire you

that

re¬

loan,

prevailing rates.

The public
acquisition of
public services by cities or public
learned

...

Federal Reserve Banks be author¬

that

seem

itself.

Capital

not be misunderstood.

I would

mittee

from

ency

their transit facilities

too

none

credit

emergency

industry seems to be free
being of the threats
of
general municipal or public
ownership. Several municipalities

has

Otherwise, you are
be justified in going
into
every ^situation,
which
I
think is close to being socialism,
prise system.

must have been unable to obtain

increase

Your

are

mal

ture,

Govern¬

business earnings. The

own

size, maturity and, among other
things,
provided
the borrower
must be established, solvent and

excuse

for the time

which

limit to' their duty to
call the nor¬
function of a private enter¬

simply

interfere with what I

only if all of the seven conditions
lated to the security for the

so far as the
situation will

ship in
fiscal

(Continued from
venturesome j re-examina¬
tion of their practices of account¬

there is- gigantic

ing about a shortage of venture or
ownership capital.. The way to

promote

Labor

reverse

four thousand people,

For

with

1934. Business loans were
permitted to be • made directly

were

borrowed money

the

cally

little community of three: whilst

June,

environ¬

engine of state does not
be able to

law

into

enacted

effect,

for,

merely fair treatment for owner¬

Must Work tor Common Good

interest/ is

public

that

say

meant

authority to make direct business

stalled

came

they prob¬

with questions of' principle,, if you want to use that terrible
particular loans. The develop¬ word.
I mean the government is
business-lending activity taking over and bailing out and
of RFC, as pointed out by the
freezing the free play of a freeHoover
Commission,
shows • a enterprise system."
gradual relaxation of standards.
Must Solve Problem of Venture
Created in January, 1932, its first

the

investment,

they have.ibf

then,

ment of

was

V; j

striving

am-,

Government, Business and Laboi

deal

loans

government's
activities,
or , creating
public authorities will never pro¬

readjustment of

they are weak, which

going

the business loans and I prefer to

ties

ment

land

Corporation.

remarks

not..

lending

employment other places, but you
keep these businesses alive until
they get into a real depression,

1947, which are excluded from the
present limitation so that the bill
would double the lending capacity
of the

adding,, to

granted

equivalent

failing business is under those
conditions.
These people can get

public-project
and
catastrophe
from $2,500,000,000 to $5,000,000,000. There are $1,100,00,000
of loans made prior to June 30,

a new

necessary

between

the

loans,

still

was

best time for the

length

interest rates

was-

structure, is threatened. The situ¬
ation must be corrected. What I

imbalance

the

labor

ecoT
at a

was

End

the invest¬

Continuing to make changes in

ter

ment

relatively high

ably were. Then you have added
is proposed, in a bill now pending, Ifuel to the fire."
And I continue
to increase the limitation on all to
quote:
-? rK.>
V
business loans, including loans to
"Here is a national agency set
railroads
and
loans
under the
up by the Federal
Government,
Housing Act, loans to the Federal financed by the taxpyers' money
National
Mortgage
Association, from all of the country^>Now,

tion is further nationalization! Af¬

admitting that

not

national blueprints.
I daresay that it
to

I want to center my

roads far from

fixed

now

have

of
prosperity for you
(RFC) to enter a specific position
of- preventing local failures and
local unemployment, because the

permit amortization of debt. Pur¬
suant to this recommendation, it

ership.

limit

time

enterprises which are economi¬
cally sound but which require
long periods of time to develop
and produce
earnings that will

In fact, the bonds re¬
exchange for railroad

that

cussed at

period

permit the Corporation to extend
financial
assistance
to
business

since

reflected

when

the maturity of loans
business made by the RFC to

by law

investors, to be
bonds, which
depreciated sharply
and, in many instances, the basis
of
establishing
the
value
was
challenged because security prices

sure,

quotation.- I

phatically

led Senator J. W. Ful-

labor

forces and

would add em¬
the fundamental

of institutional funds."

cause

maximum

ment's program, the industry was

have

this

behind

lagged

legislation

of parity treat¬
ment. Ownership, which
lies at
the base of the whole economic

limitations

the

country, farm parity was devised
to
correct the
situation; when

disadvantage,

ment

the

conditions affecting the rest of

nornic

and

relation

character

eral

by their impression that earning;
aretoo
low
or
too
uncertain,

enterprise.

loans

the part of in¬
induced partly

owner¬

injured by forces of a genr

were

dividual investors,

impending

the

business

prospects

character

Report,

result of

The

in his Mid-year Economic
recommended the enact¬
of legislation to extend the

dent,

inhibiting development."
What

failure

apathy

been

has

structure,

tax

savings urgently need real¬
istic
treatment, - When
farmers

ship

regulatory au¬
due partly

also

but

hostile

say,

What I say is in no bright of Arkansas, a Democrat
debt - and
equity
financing ;.is
personal.
The evolution or and Ckairman of the Senate Sub¬
taxes. Your committee probably
RFC, its request for additional committee of the Committee on
took .it for granted that this is
authority»and recent policy re¬ Banking ; and < Currency,
which; so
fully understood that repe¬
RFC a few
garding business loans makes me held hearings on
tition
is') unnecessary., I should
wonder
at
the
complacency of months ago,. to comment in evi¬
have like# to see taxes included
business.
dent alarm, and I quote:
whether their influence was dis¬
You will recall that the Presi¬
"To me it is completely wrong

mentions the fact that Parliament

quote

of maintaining employment
locality threatened with un¬

employment

consider¬

caused

general management

agement Association.
"Squeezed between institution
al changes of a deep nature and

way

the money

locality."

at the

June

not only to manage¬

concern

ment

reputation.

particular attraction on
market outside its own
Elsewhere, the report

pose

goes

has

thorities.

justify the making of
loans vaguely defined as in the
national interest and for the pur¬

period of eight years, I
have a certain affection for the
institution
and
concern
for its
tion for

obviously
raise capital on ad¬
to

seems

size

the Board

nucleus to the organ¬

able

small and medium
business to a basis that at¬

tempts

Having served as a member of
or as Chairman of the
Reconstruction Finance Corpora¬

possible, at least one well-estab¬
lished statutory gas undertaking
to act

road to
in the wel¬

one

Expansion of RFC

financing

basis that relates

report

repeat what I said last

.conference of the American Man^

balance

to the needs of

fare state.

company,

number

than

the lack of well-being

Fuel and Power. The reason given
was

There

port of His Majesty's Ministry

from

shifted

■

Let

again quote: "This lack of
between debt and equity

and

has

activities

RFC's

tending

that the then Chair¬
Securities and< Ex¬

Your

the

Exchange recently. pub#lished.
. V:
"

had
been
accomplished through the
issuance of senior securities.
1

capital problem should be solved
by
a
government
corporation.
More recently the defense of ex¬

study,

which

Taxes,"

and

Stock

just a little over

financing in the gas industry

believe their

do- not

but I

ness,

resisted successfully.
it/ is quickly
found

the

out

set

were

"Jobs

change Commission; at your an¬
nual convention, also commented
on the fact that the bulk of new

the earl¬

'
v~
I am fully aware of the plight
of small and medium size busi¬

de¬

new

ago

year

man

iest convenient date.

velopments. The trend toward so¬
cialization has to be met head-

with

quotes

British

Corporation

placed in liquidation at

illustrated

gers

the

that

stock

I think it was

depression, yet recom¬

that

mended

the dan¬

We are not free from

approval
an
earlier report recommending,
of all things, integration through
holding company control'. I insist
committee

;

Head-on

makes
very
in¬
teresting reading.
About twothirds of the gas supplied was in
the hands of companies and onethird in municipal hands.
The
report

lation

of alterations in the tax structure

percentage of
issues in re¬
debt issues."

in the

common

new

paid tribute to the useful and
necessary function of RFC in the

days of the

1945.

Hoover

sion

Trend

Socialistic

Meet

Must

The

business."

decline

tial

small
Commis¬

rects the RFC "to encourage

of operating costs and re-

spect

report was presented to
Parliament
by the Minister of
Fuel
and
Power
in
December,
The

preamble, di¬

present Act, in its

agencies does not work miracles
in improved service or end the
truth of simple arithmetic in re¬

(Continued from page 13)
supplies
to
consumers
make recommendations.

cent years,

Trend Head On!

Must Meet Socialist

Thursday, October 27, 1949

CHRONICLE

hope to main¬

high production through the

With J. R, Willis ton
Reuben

Williston
New

<■

York

New York

Ross

Co.

is
115

with
-

Broadway,

City, members of the
Stock Exchange.

Volume

170

Number 4850

THE

COMMERCIAL

good portion of the

railroads' tax money goes to build
maintain the highways.

and

The fact

remains that the total

taxes

paid by the truck industry,
.which is their sole cost for use
of

right-of-way,

of .gross

tenance

plus

cost

this

does

ex-j

govern-!

regulations.- There

must

flexibility in the matter of
and other operating prac¬

rates

tices,
tries,

as
so

there is in other indus¬
the railroads may quick¬
adjustments

and
as

believe

shipper

every "

determine
whether

satisfaction

own

feels

that

the

airlines and

of that fact, then he must,

waterways

taxes

pay

economic
of

the

ployees want to be good, respon¬

beginning of my remarks
—-I hope you will find yourself in
some agreement with these views*
and I hope I have given you some
enlightenment on my subject. At
least, if I have given you some
food for
thought on a subject

sible

which

condition

the

most

Katy's

can

citizens ef

the

most

transportation
produced. The

than

give you

and

rail

service that

efficient

economical

10,000

the

em¬

Southwest,

they want to continue to work

with you and for you
tual

for

our mu¬

benefit.

)

feel

has

vital

bearing

welfare; on the wel¬
railroads, and on the
welfare of our nation, I shall be

and

your own

fare

of the

content.

;

Devaluation and Prices

self-sustaining enter¬
valuable asset to the

health

the nation.

and

well-being

convinced

for

return

which

they expect

for bis-

chooses

he* could

and

—

because

you

had

ing aware of the critical situation
confronting the railroads. Recog*
niti-on is

being given this subject
think you
b,y the metropolitan
every right editorially
to raise your voice in protest-— press, by economists and writers,
and yet, gentlemen, that is an apt and
by Federal and state gov¬
low

very

operating
would have

illustration

■railroads

the

are

-I

expense.

situation

the

today,- with fine

highways. ; magnificent
airports,
waterway channels built and

and

paid

for- by

the-taxpayers, and

available

made

competitors./•„

our

little

•

'cost

y-;

officials.

ernment

desper¬

Treasury

neat profit of almost

ate as,'it .has recently
been in
England.-And President Roosevelt
crossed
up
our
representatives
who
were
attending
a
World

$3 billion.

Economic" Conference

found

London

As I say, we got

early,

and

into the game
alchemists and

our

soothsayers

Ownership
One

thing is certain

when the railroads
function
the

are

haveinstituted

unable

thought

that

had

they

ancient

dream

enterprises,

will

take

over

operations. If that happens,
the trucking industry, and other
forms of transportation, will soon

portation

the cost of all trans¬

would

imme¬

diately, because government op¬
eration would be inefficient,, and

other

and

you

:would

have

bill

tax

now

roads— the

business

paid

men

the

huge

the

assume

rail¬

government

pays

taxes.

;

and

the

result

will

bring

policies

jacket regulations
.the railroads

are

Tor government

would be

cialism

strait-

and

continued,

are

headed directly

ownership, which

first step toward so¬

in this country* Railroad

management cannot alone stave
off this tragic end, and there is
-vital

these

studies

adjustments in
policies that will

about

place the railroads on a fair and
equitable basis in the transporta-;
tion picture.

*v.:

■

*•>

need

today for a public
awakening to the dangers .that :be>jset
the railroad
industry.
We
must see a greater public. appre¬

v?-J-.:a

;TV/.

Notwithstanding

s„'

Progress

.'V

fj-.fy'

day
handicaps, the railroad industry
has made notable progress in the

practice
in

and

of
the

present

operating efficiency
adoption of techno¬

improvements. These are
in the improved oper¬
ating efficiency, faster schedules,
logical

evidenced

and

new

the
on

modern

equipment and

adoption of diesel power. We
the Katy Railroad have great

faith

the future

Texas, and

adding to our fleet of
locomotives, and otherwise

are

diesel

improving our properties and roll¬
ing stock, as fast as our earnings
will permit. There are, however,
possibilities for many additional
improvements, through the acqui¬
sition of more and better equip¬
ment and facilities. Most of these

require substantial capital invest¬
ment, and progress in this respect'
is restricted because of low

earn¬

the value

with it,

went

the

roads

the

nation,

in the last

economic

for

health

the

won't

simple

attempt

language

explain

the gold stand¬
its operations.

ard for money and
I

will

to something easy

pass on

—which

plain

is, that

the

ex¬

can

one

procedure

for

manag¬

values without any
standard,, because
that
substi¬
tutes a fuzzy theory for a tested
ing

currency

policy, find it must be played by
car

of
,v

conditions develop, instead

following
Gold,

uring

definite program.

standard for

meas¬

values was not a

currency

fuzzy theory; it

was simply a rec¬
ognition of the fact that gold was

best for

the

purpose—ornamental
it was rela¬
tively 'scarce, practically
inde¬
structible; and it has a weight-to-

and

easily

bulk

that

ratio

store

worked

it easy

makes

hoard.

importance is
of gold as
the most precious metal, from the
time of the Pharaohs to presentgreater

even

the general acceptance

making

"gold-diggers,"

day
both

by specification and by us¬
age the best medium of exchange.
But

being soft, gold coin lost
weight when continuously han¬
dled. So; governments took it in
and issued certificates of deposit,

representing

much gold. Those

analysis, who must de¬

termine if the railroads

are

permitted to function as private
and
thriving enterprises. From
the

that

public

must

come

the

relief

isr necessary

healthy

railroad

to
assure jsl
industry."

told

Relief Must Come from

Equitable
,

This

form of

relief

must

Laws *
come

■

the

equitable laws which will

place the railroads on an equal
-footing with competing agencies
of transportation. Railroad man¬
agement, too, must be given pre-

rogatives to exercise judgment in

call money.

you

road

I say this because I believe that
the

American principles of fair
play will eventually prevail, and

that

1933

index

was

have confidence

in the

out-

chaperone, "but she had

chaperone

that

would

any¬

where.
Who

foresee

can

conditions

experts

forecast

accurately?
what

see

our

coming

Can

and

plan for it? Did they at Teheran,

Potsdam,
the

Yalta, or at any of
or
Monetary Con¬

Economic

ferences?

the

"London

Econ¬

omist" says, "They are too expert
to have common sense
enough to
that

one

can

ex¬

Devaluation

Has

Done

grains

dollar

would

gold,

would get you
a

pound

changed
in

the

you
a

pound

60 grains of gold,

freely ex¬
converted, anywhere

(£).

and

get

world

was [

the

and

rate

was

4-for-one in dollars.
We

kicked

that

system

which

competition
Supply-De¬
compel the supplier to re¬
duce. It has compelled split prices
mand

141.

was

and 1940 it

was

October

In
120.

1939

Now

find

the
the
1935-1939 average for that index
was 119.4, practically 120, and that
period is now very generally used
as par for index purposes in our

turity, it paid
2%%

our

standard

savings bond rate.

ernrhent

out and

$100 this year,
on your invest¬

you

year

ment—that

seller, as we know them, controls
the exchange rate.
The govern¬
ments do that.

Gold

So, go

dollars, and you will find it buys
about 60 dollars worth of goods.
So

you
year

the

have actually
in purchasing
loan

10-year

lost 1 lh %
power

the

govern¬

ment.

wanted

practical
illustration.
In 1936, we passed a Social Se¬
curity Act, and this month we are
increasing the Benefit Allowances
from 70 to 80% to cover the loss
the

purchasing power of the

dollar in

one

generation.

Now don't get me wrong.

I am
not blaming President Roosevelt
or any of our political leaders for
any
loss in .purchasing power,
caused by
War-Boom Inflation.
My point is that our economic
technicians have completely failed
in their attempt, just as other
alchemists

have

and

soothsayers

did.

probably had the most

uncertain and most unstable con¬
ditions in the history

and«in

of the world,

estimation we are
more of the same,
eventual hope for salva¬
my

into

value

the

raise

.of

can

$35

it,

Africa

Treasury refused to do

and our
Africa

so.

sell gold to us at $35 an
and spend those dollars in

now

ounce,

England

$2.80

for

the

pound

instead of $4.03. So if Africa does
business

for

England with those
dollars, the devaluation of Brit¬

ish

) gives

currency

them

30%

for their gold for purchases
British markets,
where will

Africa

buy?

England revalued currency, but
she has not changed the extrava¬
gant policies, the obligations, the
wasteful
which
of

inefficient

and

compelled

the

has

pound

been

the

(£).

cured

International

change,

nothing

corrected.

be¬

cannot

until

prices

practices

revaluation

trade

stabilized
convertible

arithmetic, and

get

medium

ex¬

be figured by

can

subject to
abuse, or mistakes
by our alchemists and soothsayers
throughout" the work}.
Perhaps
management,

the

are not

financial

crisis,

which

has
will bring
realization of that fact, and an

only
a

been

honest

postponed,

attempt

hope.

1 •

1924,
by

wrote

just
the

that

into

itself

looks

war

that

and

ing for

day

bomb.

shall
spend
it

and

Russia's

Lenin

States

destruction,

atomic

land

Let's

ago,

years

name

perhaps

weapon,

than

it.

meet

some

the United

force

the

fellow

secret

dangerous

effective than

Certainly Eng¬

the ropes from spend¬

war

and for welfare. Per¬

haps we should doublecheck our
hand, and insist on a straight deal
with

honest deck.

President

Another

has
in

ounce

gov-

try to spend that hundred

for

one

is fixed

competition or currency ex¬
change value, whichever is higher
or lower, and neither the
buyer or

U. S. bond
in 1939 for $75, and held it to ma¬
purchased

use,

country.
you

domestic

export. The export price

come

that index at 62, about half of
1939 and 1940 figure. In fact,

for

—one

Oct.

heading
out

commodities in international trade

fixed

what, the purchasing power of the
dollar

fact, devaluation has only
reduced
prices of products and

So that

of and our
abilities and ingenuity of railroad the window in 1933, and made all tion lies in a return to a fixed
standard
currency
management and railroad work¬ currency and coin issued by the permanent
legal
tender. - We value as a medium of exchange.
ers.
So far as the Katy Railroad government
made it illegal to own gold.
is concerned, we are indeed
How can
International Trade
for-;
tun ate that we serve this rich corWe increased the price of gold, expand when we must buy and
Tidor-. of
the
Great
Southwest, •too—from $20.67 an ounce to $35 sell at price in effect at time of
wherein I believe lies the bright¬
an
ounce—and
we
reduced the delivery,
payable
in
currency
est prospects for continued indus- •gold weight of the dollar about values in effect at that time? The
trial and agricultural growth. We 40%, giving the United
States' dollar is now the currency stand¬
because

which

that I felt the rail¬
industry had a bright future.
I do sincerely believe this, and I
am
especially optimistic regard¬
ing the Katy Railroad.

years.

11,
1933,
however,
when things had recovered some¬

certificates were convertible into

public,

March
As you

purchasing power was 178.

Tested Policy

;

ings ajod the hesitancy of venture
gold on demand, making them
ciation of the value of the rail* capital to invest in railroad se-?
gGld-backed currency; certificates,
curities.
*
the

over

In
178.

lower than the basement.

Substituting Fuzzy Theory for

the

transportation situation. It is to
be hoped that the public attitude

present

standard

dollar—and

the

know that was in the
the limitations
on
government the depth of our serious depres¬
borrowing, government spending, sion; we were very much demor¬
and government debt. *
alized and commodity prices were

and

their

follow. And

studies

Railroads Have Made

private

government

if and

—■

for

restrictive
of

the President of the United States

transportation
Danger of Government

Congress

value.
It is like
that girl that went nowhere with¬

about

was

undersell

world, and it has

standard

(Continued from page 15)
country

and

good

own

pert.".

eventual profit,:
by announcing that, "The United something-for-nothing — presto,
-and demand the use of vast, ex¬ support the industry.
Slates "Seeks the kind of dollar brass
becomes
gold!
Bingo, $3
By using transportation serv*
pensive
public-owned
facilities
which,' a generation hence, * will billion out of thin air!
ice that could not be economically
•with
which
to
do
business
in
But remember, the objective of
have the same purchasing power
on
a
self-sustaining and the same debt-paying power that Currency Management op¬
competition
with the- railroads. justified
) Any way
basis, a shipper is not only^ qdci^ as the dollar value we hope to eration we kicked off in 1933
you look at this picture,
the
railroads- are: placed
in an ing to his own tax burden, but he* •attain * in the near future." In was to give the Dollar—Old E.
-unfair disadvantage in their ef¬ is withholding the support needed
Other words, we set out in 1933 ;Pluribus
Simolcon — the
same
by the railroads to effect econ¬
fort to operate their plant
as a
tcradjust the value of the dollar, purchasing power and the same
omics in operation which would
•^^f^^staihihg, free ft enterprise.' i
W^ flunked for economic" plan¬ debt-paying power a generation
eventually permit them to lower
hence—that is now.
I wonder what; your
ning and currency management,
reaction; freight charges.
would be if a benevolent govern-:
v
Well we are nearing the "gen¬
v
The Dollar Purchasing
The railroads are designed 4o eration
lment would come along and build
hence"; so, we have an
Power Decline
handle
volume
traffic,
and
a opportunity inow to take a look
;a big, modern lumber yard across
Fortunately we have an index
greatly increased traffic load can at the1 record. In order to manage
the street from your plaed of
"busi-j be carried without
appreciably the value-bf the dollar, it neces¬ to measure that statistically, the
ness, and then permit an operator
increasing operating costs. An in-; sarily had -.to -be cut loose from old Irving Fisher Index, of the
;to occupy this yard for, a token
creased, traffic load on the rail*
purchasing power of the dollar
any
standard that would limit
'fee, with no real restate taxes
in wholesale commodity markets.
roads today
would provide the such f activities
and
operations.
pay, to do business in competition
quickest
means
for
lowering Gold was that standard; it was It uses 1926 as par, and it has
.with you. At the same time the
been published in our "Bulletin,"
valued at $20.67 per ounce, and
government would fix y OUrjfr ices freight charges. •
so
we
have the complete range
•An
and
encouraging sign on the every dollar was backed by a
regulate r^our ^pperatidhsf
of -the purchasing power of the
while the
operator ^across
the horizon is the. trend that can-be definite number of grains of gold. dollar
published in our "Bulletin"
street was left free to do business noticed that the public is becom-j
of the window !went that
•in

the

fixed

What

not
as

ard

know

of
his

railroads,

private,
prises, are

good

freight—every business and civic

to good government,
schools, and good public
properties*. Beyond that, we ex¬
pect no other return. The trucks,

contribution

meet

That, gentlemen, is the story 1
here to tell you. As I said

situations.

leader—must

taxes

pay

make

tive

take

not

individuals,

companies,

our

great

changing conditions and cempeti-!

right-of-way.

and

You

strict

.railroads

.into account their original invest¬
ment

mental
be

because

rights-of-way,

18% to 22% of gross

and

revenue,

denied to them to

tent

(1679)

came

ern

operation of their properties,

r.ow

opportunity to grow
and to be able to keep
plant and equipment in mod¬

our

the

Manges from

main¬

The

revenue.

taxes,

about

averages

the

CHRONICLE

with you,

(Continued' from pageHL)'V

"v-

FINANCIAL

want only the

Tke Railroad Picture
ironically,

Truman

The

says

United States must purchase

ma¬

terials

that

can

from

produce

the

them

countries

economically,

give them the dollars to

pur¬

chase from us, and that is a sound

poiicy and objective—a Free Ex¬
change of trade would allow sup¬
ply
and demand to
determine
prices. But we cannot have a free
international
without

medium

that
trade

exchange
freely
handle

trade

exchangeable
it with, and

not in sight, and foreign
exchanged freely is not in

sight.;)';:.
Let's

/"■),
not

kid

ourselves.

dealing internationally,

you

When

must

figure two prices — the price Of
the goods, and the price of the
money.

In my estimation it's that

simple!

John .F. Burns in Albany
ALBANY, N. Y.—John F. Burns
has opened

offices at 74 Brookline

Avenue, to engage in the invest¬
ment business. Mr. Burns has re¬

cently been with Corporate Lead¬
of America and prior thereto
was in business for himself.

ers

COMMERCIAL

THE

(1680)

CHRONICLE

FINANCIAL

centive

Weigh Their Banks

When Stockholders

important banks

necessarily been omitted.
We do know that in a great

tiave

banks there are large and
varying
amounts of additional
values which could be added to
this net worth, increasing their
many

be
on

earnings by

with

based

"net

of investments

value

amor¬

over

frequently an impor¬
tant
factor.
Then again, many
'ba-iks have accumulated reserves
possible loan losses, and these
usually deducted
as
valuation reserves from loan
totals.
Also, banks have possible
write-off values and potential re¬
coveries on bad debts and other

charged-of'f assets.
<

often

but

importance

ne¬

glected by analysts and appraisers
of banks, is the investment which
;banks have made and must make

improvements and

real estate,

-betterments, fixed assets and op¬
erating equipment necessary for
the continuous and efficient con¬

business. These

duct of their daily

banks have

items in a great many

^already been written off as assets

charged off at a
rapid than is al¬
lowed for normal depreciation for
income tax purposes.
Thus, im¬
being

are

*>r

far

■cate

are
follow

bankers

when

volved

in¬

outlays

capital

portant

the

conservative procedure of writing
off fixed assets.

Recently, I had the opportunity
cf

applied

which had been

.amounts

the

that

stated

banker.

phase with

this

discussing

banks

that

1948.

of the use of an addi¬
portion of their assets. The
.oss of
earnings was, in effect, a
special income tax cn banks. Due
to widespread uncertainty, unfa-*
vorable publicity, and the threat

38.0

number

York banks

prominent

our

banks

member

Reserve

inated

Federal Reserve authorities.

haps

banks

for

son

and

New

has

too
to

book

mated at not less than 5% of their

million

$2,340
counts.

capital

total

ac¬

Current

value."

tabulation

our

evi¬

denced

bank

and

whose

consider

have

low

the

current

discount

14,200 operating

banks

trust

and

ownership

com¬

compa¬

the

represented by over 60
million shares of capital stock in
*he hands of investors. As shown
'in

the

tabulation, all but two of

banks

listed

were

at discounts from their
ines.

quoted

book val¬

$tfew York City.
tal
vr

accounts

are

Their total capi¬
$2,225 million,

were

21% of the nation's total. Based
June 30

prices, the aggregate

value

market

their

33.572,000

outstanding shares was $1,604 mil¬
lion, a discount for this group of
$621

million,

lished
of

book

28%

from

values. We

that

course,

considerably
values

the

know,

discount

greater when

taken into

are

pub¬
is

other

ers

actions

too

security profits,
recoveries, losses and chargeoffs,
and

transfers to

Reason

For

Lower Market

JLet

ers'

return to the stockhold¬

question, "Why

are

the shares

bf
our
important
commercial
#>anks and trust companies selling
at

discounts

The

from

book

have been

reasons

doubt

values?"
many,

reflecting investor attitude
all equity securities.. In

toward

the market place bank shares are
in competition with shares of all
other industries.
Investors

generally have taken

meutral $nd cautious view of bank
•

"•

•

stockholders'

the

For

the

stock

would

;

book

at 20 times these

earnings of $2.50.
3arring exceptional circumstances,
an appraisal is obviously un¬
realistic in the market place to¬
day. Current quotations for lead¬
ing New York City banks with

new

based

and

$40,

$50.

$35

between

against a book value

not

r, '4 ';

'■

attracted,

how necessary,

except

Recently, for example, in
where additional shares
fered
was

stockholders,

set at 60%

the

not

exercise

old

the

mium above book value.

through sale
count

from

that

the

were

book

that
taken
in

extent
at

dis¬
it is

value,

apparent that the old stockholders
found themselves sacrificing part
of
their
equity..
Stockholders,

greater than the book values.

when confronted with such

power

Stockholders

banks

are

of this changed
They realize that in
the market
place the value of
their
shares
is
determined
by
actual earning power rather than
by the frequently unrealistic fig*
J nJ .1.,
i «.
'•
scarcely

unaware

situation.

•

•'

:"? C V-

..; *'

;

tions.

improving
the surviving

sit¬

forced to consider the
alternative of withdrawing from
uation,

their shares at

against

ousiness.

But

realize $57

at present

ers

recent

■he

7ork
have

City,

trend

implications.

The atuiuae of banK

is demonstrated bj

center of the nation's

nerve

unlike those existing in other

bankers

areas,

everywhere

the

Today,

City.

banks

member

are

York

New

number

and when the two deals now undei
way

consummated, there wil
only 32. These five retir
banks had total deposits o
are

remain

:ng
*400

holders have

Of their total capi

million.

tal accounts of $31

come

investments

tutions

regard their

the smaller

insti¬

speculative holdings.
This deveiopment has serious im¬
as

plications.

Banks

basic to

are

enterprise system.

of the system

mined.

our

banks

will

soon

be under¬

7-7- 7.

•

interest is involved.

Government, private business, and
management all have a stake and
a

responsibility. A satisfactory

so¬

lution will

surely come, if all par¬
ties will work patiently together.
At the same time, it must be re¬
membered that the bank stock¬
,

holder
as

wedded

not

business.

His sole

banking

concern

with the value of his investment.
Where

him

accept book value and to

profitable

for

dispose of his holdings in a' bank,

dissolving the corporate structure
in the process, it is certain that
he

million, all bu

'7-;

The public

Since New York City

private banking system, and since
its problems are in many ways
not

Unfortunately, this situation has
a condition whereby an
increasing number of bank stock¬

can
no
longer attract and hold
private investment capital in suf¬
ficient volume,
this cornerstone

cevelopments in New
developments whicl

naturally aroused the intense

is the

share, compared with

produced

free

atocKnoia-

interest of bank managements ev¬

erywhere.

$150

market quotation of $30 earlier
this year.
.
.

institu¬

such

its monopolistic

has

words,
fewer
banks will compete for the avail¬

able

$250 each

price

market

quoted only a few weeks earlier.
In another case, shareholders will

other

will

readily do

so.

Tie Outlook for Business

are

the business

through
liquidation.

merger,

(Continued from page 2)

than

expected and

contracts,

new

construe-

another

indicator

of the outlook for

heavy industry,

That
activity in the

showed unexpected strength.
the rise in business

third quarter of this year was

rel¬

atively moderate is indicated by
the fact that industrial production

business

recovery

assume

substantial

proportions, it must
be based on something more real
than a seasonal rise or inventory
hedging against strikes in basic
Nor is the upsurge of

industries.

orders for inventory replace-

new

ment that has sparked the recent

only modestly and business revival likely, to be a
that estimates of gross national sustaining influence for more than
Business inven¬
product are slightly lower than a brief period.
for the second quarter.
tories, while below their peaks,
are
still high in dollar volume,
and it is difficult to perceive any
Major Factors in the Business
increased

has

Outlook

deficiency
tail

the

aggregate.

sales in the Fall

season

Re¬
have

light of developments so
not
evidenced
that
pronounced
far, what is the outlook? Have we
strength which would encourage
had our major initial postwar re¬
a more liberal inventory policy.
adjustment, or is the present rise
A renewal of inflationary pres¬
only a minor and temporary im¬
sures
and
strength in selected
provement in a generally unfavor¬
able

situation?

There

are

obvious

dangers in giving categorical

However,

swers.

an¬

by appraising
prospects for

commodity

prices

would

cause

restocking
of inventories,
there is real doubt that the

some

but

general level of prices is likely to
key sectors of the econ¬ turn sharply upward in the near
future.
This
much seems clear:
omy, it may be possible to arrive
our big postwar inventory boom is
at a plausible point of view.
behind us, and most pipelines are
The conclusions of such an an¬
and

trends

the

certain

if
not
generously
be summarized about comfortably,
recent pre-strike filled. We can hardly rely upon
inventory accumulation to pro¬
upturn in business reflects a
variety of factors, including a nor¬ vide the basis for a long-sustained
mal seasonal pickup in some lines rise in business activity. However,
and
a
resurgence
of orders in a wave of inventory rebuilding

alysis

may

The

follows:

others.
are

The factors

now

ness

for a period
of
months,7have considerable

operating might,

likely to bring the busi¬
indices back to the record

not

some

the

business

few

effect

indices,

in the especially on the volatile Federal
near future.
Many of the durable; Reserve index of industrial proindustries have so far experienced duction.
little or no adjustment
The evi- j
(2) p)ant and equipment spenddence
seems
to
indicate
that
jng. __ present evidence is that
spending for many
°£ the impor- busjness spending for plant and
tant products of the heavy Indusequipment is over the peak and is
levels of the postwar years

an^

did

pre-emptive

of shares

the

than

those days
was
much
greater, and in the
market
place, those rates sup¬
ported
quotations " equal
to
or
earning

of¬

price

the

stockholders

their

rights. Thus, to
new
"partners"

The rate

a case

were

of the book value.

estimated

was

half

past, however, as many
stockholders of banks will recall,

bank cap¬

new

sacrifice by present own¬
ers, and then only if earnings or
the prospect of earnings warrant
the desired capital increase.

earning ratios of 14 to 15 times,
and such a ratio would produce a
,,

for

at great

somewhere

will

funds

matter

such

igure

recommendation

Certainly, investors could
nardly be interested in participat¬
ing in the formation of any new
banks.
As
for providing
addi¬
tional capital for existing banks,
recommended by the authorities,

however,
the
market
to appraise its value

are

investment of

the

have

adequate capitalizations

weighing their banks, it is only
obvious that existing condi¬

ital.

value.

quoted

of
resulting in a
To stockhold¬

consequences

power,

market?

bank shares usually sold at a pre¬

Values
,

releases from

the

are

earning

tions

Thus, this bank's pure
earning power is at the rate of 5%

The

reserves.

account.

What

operating
earnings
per
share, exclusive of capital trans¬
such

Capital Not

Forthcoming

value of $50 and whose

"book,"

■.

Seventeen of these banks

Bank

New

lor all

The

would seem
been set too

low.

recurring
earning power is $2.50 per share.
By this we mean the bank's net

mercial

should

by their total capital ac¬
June 30 of $4 billion,
accounting for nearly 38% of the
$10.6 billion total capital accounts

nies.

authorities

quate earnings.
It
that the sights had

book

be stable div¬

The fact remains,

monetary

counts

for

power

reconsider their definition of ade¬

power

stockholders, let

bank

Bank

value.

that the discount they
evidence of insufficient

carry

The importance of the 50 banks

listed

earning

bank

current

It
earnings on the investment.
would appear that the banking

power.

the

institutions

redeem

opportun¬
the earning

tion

are

safe investments today

payers.

however,

is not sufficient to
support a market valuation equal
to
book value.
Entirely
apart
rom cash dividends actually paid

corresponding

that

book

or
are

idend

Bank earning power is
low, too low that is, in relation

itfew York City, the

truth

and have proven to

earning

jffigure may be conservatively esti¬

ever,

earning po\ver is not enough when
reckoned
on
the
stockholders'

equity,

discount

ities

these

Per¬

needed to correct this situation.

background,

than

now

The

outright

increased

and

know
and under¬
stand the real facts, and your ef¬

16 years

today—low

outlets

Comptrollers

the dominant and continuing rea¬
been

through

liquidation, and thereby leave the
community bankiess, tne door is
opened wide for government to
enter, because, it will be said,
"private enterprise has defaulted."
It must be conceded, however,
that the acquisition and absorp¬
tion of retiring banks provide new

than any other group,

forts,

that

adopted such* a course.
In one
case,
for example, stockholders
were
offered an opportunity to

sociation

surviv¬

banks go

But, when

business

members of the National As¬
of Bank Auditors and

you

Earnings

this

with

information is dissem¬
that given out by the

stocks

Along

such

thei;r stockholders when

deceptive

lower today than

are

Bank

Low

for

quotations

Misunderstanding results.

the lows of 37.7 in
in 1949 were only

fact,

power

exaggerated in the
findings given out to the

public.

slightly above the Bank Holiday
price level of 35.0 on March r 4,
1933.

earning

true

Great harm is done to banks and

cording to the "American Banker"
index of New York City bank

vault^ furniture and fixtures, etc., i

eral

The

banks appears

earning power, bank shares in
City fell to the lowest
levels in many years.
Thus, ac¬

prices,

Earnings Exaggerated

now

sion of the acquiring and

closely studying the solutions beng
worked out in New York
Eighteen months ago, there were

official

and

be¬

are

provision for losses;

True

Mew York

1948

returns

these

that

oered

fore

requirements, banks were

tional

stock

Let it be remem-

$2,340 million.

deprived

provements, operating equipment,

In considering the 34 Fed¬

their total

h i g h e r

the

Because

reserve

1.948, and at the rate of 6%
capital accounts of

from

unduly penalized by actions of
monetary and banking au¬
thorities
to control
inflation in

the

they were on that day

counts.

For the year 1949, net current
operating earnings of the New
York City member banks are es¬
timated at $140 million, unchanged

politicians and
heir economist advisors.
Stock¬
holders of banks suffered and were

«by his bank, a leading nationally«known institution, toward the ago.
writing-off of real estate and im¬

■represented a sum equal to nearly
"7% of this bank's total capital ac¬

counting and reporting procedure
used by the banking authorities.

has

caught

are

17% during the first
1949, over the cor¬

period.
This discrepancy arises
mainly because of unrealistic ac¬

the crossfire of

in¬

earnings of these member banks
showed a slight decline during the

chilled investor interest is the reilization

City

in 1948.
The
is that net current operating

fact

be met

which

York

responding period

capital funds.
reason

member

months of

six

Another

that

stated

Reserve,

New

creased

sufficiently adequate cur¬
rent earnings or out of existing

for

amounts, too, are

these losses will

whether
out

accounts

newspaper

profits" of the 35

banks

For

stockholders.

own

of being returned to stock¬

stockholders

banks.

information given out by

Federal

the

allowances once
again financing private busi¬
which banks have applied to re¬
ness and, therefore, are necessar¬
duce the statement value of their
ily assuming the attendant risks.
investment
portfolios.
Further, There will be losses. The stock¬
the appreciation
in the market holder must ask the question
tized cost is

their

example,

valuation

reserves

the

process

expan¬

reconciled
reports issued by banks

$-3 million has been

and

out

banks, nor

with¬

the elimination

extension

ing

these figures easily

are

the

means

portray the

no means

means

the

bank

actual situation at the

competitive condi¬
tions, and at a time when the risk
factor in the business has been
clearly in the ascendance.
Un¬
book values per share correspond*
precedented competition exists be¬
ingl.y. Not all banks show their tween banks and nonbank lenders
reserves for contingencies on the
as well as among individual banks
Call Report.
We may cite such for all available loans. Banks are
difficult,

der

authorities

Reserve

rising operating costs and high in¬
come taxes—all these factors un¬

stockholders

This

banks, and if accomplished by holders. 0 '-v'.,'7'
sale or merger method, also 7 It
is not surprising

offered
by
government
what appears to ures
The information
and
the adverse long-term impact agencies.
banks of low interest rates, figures published by the Federal

shares because of

(Continued from page 10)
sampling many

draw.

Thursday, October 27, 1949

headed for

decline.

seems

Under these

circumstances, the chances are for
another downturn in business ac-

tivity.

business
the

is
m

levels

downward trend.

The most

estimates of
Spending intentions, based upon
surveys conducted in
late Sum-

recent

government

entirely possible that
show a d
of about 7% in
general may drop to outlays for 1949 compared with
of mid-1949, or even,
194g More significantly, however,

1950spending by practically every maadded,
ind *strial group except eleclgnore temporary declines in the
{ric and gas utmties aDpears to be
business indices as the result of
on ^be decbne
Finally, compari-

lower,

before

the

end

These opinions, it should be

strikes

sale

basic

indus-

sons-between the respective quar-

ters of 1949 and 1948 show a
progressively less favorable oicunderlying these con- ture quarter by
The danger flag is flying. Con¬
quarter.
This
:
tinuation of the discount market/ elusions is in order.
/
'fairly oessimistic view of the outin bank stocks will act as an in¬
(1) Inventory prospects — If look if or plant
and
equipment
or

the

brief

discussion

some

reasons

'-fly

Volume 170

Number 4850

THE

spending see™s to be supported by
orders
have

industrial

for

shown

not

equipment

any

without government
guarantee,
continues to be available on easy
or

significant

upturn, and the machinery com¬ I terms, both for home purchase
ponent of the Federal Reserve in¬ | and for the construction of rental
dex has been
steadily declining housing. In some areas the cost of
for

almost

two

Scientific

| home ownership is

years.

and

cost of

technological

high

costs

wage

con¬

tribute, will help maintain busi¬
spending,
especially
for
of

reduced

capital out¬

lays is quite unmistakable. Con¬
sidering the acquisition of war
plants by business and the great

ing to

additions to plant capacity in the

has

postwar years, some decline from

areas, and will ease further when
the larger number of starts in re¬

There is

which

will

increased

business

and

investment

commercial

the

lower

pros¬

volume

Consequently,

for

volume is

inflexible
business

while

construction

the

the dollar

year,

was

by dealers and the availability of
cars
and
models,
some

relaxation in

financing terms, have been sufficient to keep production and
sales

record

levels.

Recently,

however, dealers' stocks have be¬

government spending poses the
problem of balancing the budget,
and business corporations are gen¬

to creep up, and competition
price concessions are becom¬
erally the most popular targets in ing keener and more widespread.
Most analysts seem agreed that
any political program for higher
gun

and

the

taxes.

ment
to

incomes,

that

the

relationships

that
on

amicable

of confidence.

the

au¬

expected
population
and

the

must

now

income, and
depend largely

replacement market.

doubtless

conducive

is not

filled,

many

additional

some

situation

might

That market, of course, is very
large; we have an abnormally
high percentage of old cars. Also,

government; there is a lack of
knowledge, of understanding, and

and

This

largely

the levels of national

business

between

been

have about

considering

of venture cap¬

establishment

has

tomobiles

Indeed, the political environ¬
as
a
whole is unfavorable

the

backlog of accumulated de¬

mand

in this
respect consists of individuals of
Another popular group
large

Until

the

regarding

with

large

our

The

recent

have

budget

deficit.

international

increase

may

Europe,
effects

some

is not
less

devel¬

mili¬

our

which
the

will
econ¬

likely to be significant
the

world

un¬

becomes

news

year. The trend of govern¬
ment thought and action is in the

sustained

-capital

can

concessions

made

deal-

investment.

advent

winter

and

the

return

normal

seasonal movements.
(3) Construction — The dollar
The consensus seems to be that
outlays for building and construc¬
1949 is the peak automobile
tion in 1949 will be about as large
year,
in

1948.

and

Private' construction

will be lower but the rise in

Because

production

1950

20%.

reduction

some

that

likely to be down by something
in the. neighborhood of 15%
to

pub¬

lic construction will offset this de¬
cline.

in construction costs, the

compari¬
son
with last
year
in physical
terms appears favorable. The high
level of building and construction
reflects the accumulated backlogs

carry out, the trend is in the di¬
rection of reducing our tariffs and
other barriers to imports.

Th6

recent

contracts

above

the

Sales

just experienced
most substantial and

the

cur¬

in this country foresees the most
dire consequences, including the

loss of
of

our

export markets, floods

imports,

our

repercussions

severe

depression
flight from

economy,

and

During
month

been

levels

September,
for

which

farm

imolements also

have been very high in the
post¬
years and have been a sup¬

short term. True, the net effect of

devaluation is likely to be defla¬

tionary
will

tend

and

the
to

United

encourage

States; it
imports,

ever,

discourage exports. How¬
the impact upon our econ¬

omy

will

moderated

continuance

foreign
shortage of
rest

large

the
'programs

the

persistent

aid,

goods

many

the world,

efficiency

the

the productive

industry, and
the relatively minor importance
of our foreign trade when meas¬
our

ured against the gross dollar vol¬
ume of our production. Further¬

The

prices, good

running
a

year

the

data

last

full

avail¬

lower

dollar volume.

already

the

„

this

1.950.

and

Restrictions

unexpectedly good

record is due to the fact that resi¬

major

dential

ingenuity in adjusting
operations to market re¬
quirements of style and . price,
concentrated

lower

cost

the

adverse

side

future. However, the impor¬

near

tant

consideration is that

effect

likely

the

its net

accentuate

other downward forces

in the

operating

economy.

the

difficult

and, at the same
time, most important factors in
appraising the business situation

will

been
and

able
.

and

dropped
the
in

farm

some

raw

prices
in

commodity

products,

foods,

materials

;

have

substantially

average,

and

for

more than
while the decreases

of manufactured

retail

much

prices

have

modest.

retail

goods
been

However,

have

declined

lower

provements,

output h?ve

likely

Prices

outlook

announced

are

crops,

even

the

was

for

year.

for

other
Here

debt*;; conditions' and

the

labor-saving advantages of farm

pered

and the

dealers'

concessions,

availability of much

mer¬

chandise to the prudent buyer on
sales

prices.

appreciably
below
•>"•••
V'
* • ■■

list
.• •••

The

relatively small correction
reflects a variety of
sustaining forces.
Business ac¬
tivity has been well maintained,
in

and

prices

many

heavy industries have

off,

expenditures

only

important

will

rise; the

question

how

much.

Consequently,

In this analysis it has been
sumed that government

tions that have infiltrated into the

will continue to

ever-rising labor costs.
many of the distor¬

price structure
of

ment

Even at the

us.

short-run

and

ment

the past dec¬

over

still with

are

embarrass¬

difficulty,

prices

realign¬

would

the

the rise
est

fiscal year

July.

This may

conservative
world

agreement
ments

for

justments in prices difficult, may
very well contribute to some de¬

Should

terioration

toward

the

business situa¬

years,

with large accumulated de¬
increased costs could be

the

immediate

postwar

mands,
passed
able

without

any

the

high

effect

production.

However,

appreci¬
level of
as
these

accumulated demands
will

diminish, it
increasingly ,; neces¬

become

sary

reduce prices

if produc¬

tion

volume

to be maintained

appraisal

the

lack

the

to the basic

our

require¬

military

defense.
substantial steps*

take

defense economy, .a re¬

appraisal of

the economic situa¬
tion would be
necessary.
Government action and spend¬
ing serve to cushion the economy
in
a
business

downturn;even*

without deliberate
action, experi-7
ditures tend to rise as

employ-^

ment

and

does

prices decline. But this

not

ment

that

mean

can

prevent

the

any

govern¬

recession^

that

a
rising level of govern¬
spending is an effective

ment

guarantee against deterioration h*
business situation.
The

market. This pressure of lessened

the

demand, and lower selling prices

exception is if

operating against generally high
inflexible costs is likely to
eat further into business profits,
with consequent adverse effects,
as
already
mentioned, on
the
levels of plant and. equipment
spending.

ernment

spite of the factors which
significant price reductions

make

difficult,

reasonable

judgment

at the moment would be that pres¬
sure

prices is still downward,

further corrections in prices will
be made, and commodity prices

will

lower

prices

will

probably

sufficient

nrevent any strong resurgence

inventory accumulation.
Effects

Government

Against the prospects for
clining
rates '? of .) spending

give rise

ties,

increase

the

prospective

government spending

likely to offset the reductions in
types of spending?

other

The demand for
will

receive

from

dividend

the

National

billion.

disbursed
nine

This

change

over

Service

period

months

and

faster

snending
them.

will

six

inflate

be adjusted to meet;
is still required tc*

can

Time

devise, enact, and

for

and

smooth

the

right

out the

cash

buying will

be spread over an
longer period and will not

increase

the

rate

consumer

spending by more than oerhaps 2%
or 3%.
A one-time stimulant of
kind

this

nificant

will not have

though it

any

sig¬

lasting effects,
al¬
contribute to the

may

support of business operations in
the

first half of

The
ment

sumed

the

same

our
economy
and the business
outlook
already discussed,
this

prospective deficit is not likely to
business

expansion

enthusiasm

cause

rise

for

general in-,

commodity,
n
.
;

prices.

However, the Congress and the
are
facing difficult deci¬
arising out of the stupendous-

nation
sions
level

Either

government

ditional

or we

grow¬

must raise ad¬
The

revenues.

for

spending.

risk

the

run

ing deficits,

growing-

reduction in excise,
and for other forms of tax

pressure

taxes

rise

the

choice

cits

between

made

outlays,

prospec¬

that

means

further

defi¬

taxes will have to be

reasonably

probably

soon,

in 1950.

Neither

choice

likely

beneficial to business. Con¬

prove

tinued

deficits in the face of gen¬

erally satisfactory levels of busi¬
counter

run

ness

thinking

the

estab-,

business

men

On the other

hand,
philosophy and nroposals.

the tax

of the Administration will not be
favorable to business, or to the ac-

cumulation

business

investment

and

capital.

The

of;

desirable j

prospect of reduced government;
spending, lower taxes, and debt
retirement
for

some

will

not

realized

time to come.

year.

snending,
last

of govern¬
which was re¬
is still evident.

year,

some

prospect of

leveling off, it is certain that gov¬
ernment expenditures will con¬
tinue to rise.

The sohere of

gov¬

ernment is constantly

expanding,
and
outlays for public works
nrice-supports.
social
security,
housing, and aid to veterans have
an overnowering political appeals
if

new

programs

are

launched, snending, will increase
the

about

Considering the size of

trend

Although the rate of increase ha*

the

Conclusions

upward

recently shown

Even

pTs:

budget deficit of
$5 billion, and a

deficit "of

amount.

approximately

and investors.

even

purposes,

For the current fiscal
year,

outlook is for

conclusion,

additional

new

inevitable fluctu¬

ations in business.

lished

the

out

carry

Government spending
cannot be increased in
exactly the"
right amount, at the right time*

large share will be spent
for consumer goods is a foregone
a

can

governments

programs.

personal income only moderately.

but

than

tive

will

sum

slack in the
economy*

relief, in the face of the

Life Insurance, estimated at about

$2.8

some

however, business conditions

goods

government spending early
year with the payment of

to-

overemployment, full
facilities, scarci¬
inflationary pressures^

boos*

consumer

substantial

and

Given

for

the economy must be placed the
outlook for higher outlays by the

gov¬

of production

use

flationary
de¬

many of the products of heavy
industry by the private sector of

government.

only

wartime,
outlays are so large

rekindle

Spending

too

view

and

to be

prove

5%*

beginning next

outlook,

news

around

say,

in the

The policies of both government
and labor unions, by making ad¬

tion.

be restrained to mod¬

can

spending

as¬

spending
increase, but that

proportions,

best interest of the economy.

That

(6) Price outlook—One of

than is indicated by the in¬
dices as the result of quality im¬

again, in spite of unprecedented,
prosperity on the farm,
large
holdings of liquid assets, favor¬

builders have shown sub¬

stantial

their
haVe

than

year

1948

wheat

Much of this

and unlimited

crops,

production
opportunities,
which
brought the greatest agricultural
prosperity in our history, is about
over.
Agricultural
income
is

ago.

are

factor

prices. Since reaching a postwar
peak in the third quarter of 1948,
the general index of wholesale
prices has declined about 10%.

ture.

tures.

porting factor in the business pici

the

year
unemployment,
our
from now than they are at present.
currency, and ultimately a reduc¬
The declines are likely to be of
tion in the gold content of the
modest
proportions,
averaging
United States dollar.
perhaps 10% or so; a price col¬
These
views
appear
extreme
lapse is not indicated. Neverthe¬
and unrealistic,
at least in the
less, this downward dri^t of

increase was nothing
short of astounding: more than
40%
above
September 1943 in

able,

generally

war

construction

months

have

threat

management

and

world has

one

most

machinery in use on
arising out of the war, together farms has increased
substantially
with a large contribution by gov¬ in
amount,
quality, and
effi¬
ernment in the form of .direct out¬
ciency. The outlook for agricul¬
lays for public construction and ture suggests a less favorable sit¬
loan
guarantees in the field of uation for the
equipment market
residential building.
<
in 1950. The combination of
peak
In

Finally, continued
by labor unions subject

business

„

business will be difficult indeed.

fense

high levels.

demands

direction, of assisting Europeans Many groups in the economy have
help themselves. While the not shared in the rise in incomes
full program will take time to and have been priced out of the

high volume of j ers, and the possibility of some
If we face a reduction in factory prices or the more, foreign import restrictions
of
downward drift in the level of introduction
cheaper models were already in effect before de¬
!
plant and equipment outlays, should not be ignored. The short- valuation. Thus devaluation per
maintaining a satisfactory level of term outlook is clouded by the se will probably not be a major

ports for agricultural commodities

expense

bomb, the
Congress was in the di¬
reducing our program
foreign aid in order to cope

trend

rection

in the international field
rule out
any reduction in the total of in¬
ternational and defense

ade

atomic

$£

expendi¬
Economic aid may be ta¬
but the rearming of
Europe is likely to continue. De¬

announcement

recent

the

necessary
and desirable adjust¬
ments are prevented by govern¬
ment policies, such as price sup¬

suffered.

have

rency values in modern economic

lower-priced
together with

Furthermore, the rising tide of

sources

markets

our

likely to be lower than widespread
readj ustments of

production, and sales in 1949

in connec¬
tion with pension plans.
These
•developments all indicate a siz¬
able squeeze on business profits.

ital.

recent

Our export surplus is large
because of our huge pro¬

years.

is satis¬

very substantial. Price concessions

further heavy burden

traditional

than

history. The dollar has been made
plements — The contribution of considerably more
expensive for
the auomobile
industry and re¬ nearly all the world outside the
lated industries to
employment, Soviet,sphere. A body of opinion

lias been called upon to assume a

and

1950

(4) Automobiles and farm im¬

boom, the-pressure on plant ca¬
pacity has diminished, business is
becoming more competitive, and
profit margins are declining. But

medium

(1681)

augmented'by the public

in 1949.

passing of the postwar

and

therefore,

for

factory for next

spending in the long run is
for business profits.

to be

provide

cal

year.

outlook

side

1950,
are:

outlook

of the volume of plant and equip¬

down

will

likely

to omy, but the net result for total
outlays in the international sphere

appears

housing programs butt:these are
not likely to assume large propor¬
tions until the latter part of the

of low investment. As

costs tend

trade

economy

will be

4; One of the major determinants

the

foreign

less net stimulus to the American

was in the
current year compared with 1948.
Construction
of
public facilities

prospects are not encouraging.

building

and

years,

nificantly less than it

regards the future, however, the

labor

;

worse. Even today the
private building." Public construc¬
pros¬
tion may be larger than this
year, pects are that ECA expenditures
will be reduced for the next fis¬
although the increase will be sig¬

plant and equipment which came

the

that

year;

trade—It

much

out of the. war-and the long pre¬

With

For

pects

ciencies of industrial and business

the

Foreign

completion. In¬ opments
construction
has
been tary aid

have peaked off last year,

plant

a period of
Attention has been dis¬
tracted from this problem because
of the high rate of capital spend¬
ing in recent years; so far, we
have been making good the defi¬

ment

housing shortage
noticeably in many

sagging for almost two

equipment over

years

accom¬

The

eased

dustrial

im¬

years?

war

(5)

cent months reach

portance as time passes. How can
we assure a continued high level
-of

faster rate

demands for

new

modations.

underlying problem

assume

housing at

our

than the

levels is to be expected.

recent

machinery next

only

lower than in the past two
years.
For some time we have been add¬

equipment. Nevertheless, the

evidence

CHRONICLE

spite of the
grams of foreign aid. In spite of
spurt in recent months, the tempo
ECA, foreign countries have had
of residential
building is expected
to impose restrictions on the im¬
to slow down during the next
year
and new starts are likely to be portation of American goods and

ness
new

lower than the

renting.

Nevertheless,

advances, and the pressure for
plant
modernization ; to
which
present

FINANCIAL

homes, and are able to sell their machinery, 'prospects
point-'to • been operating qnder^favorable'
product.
Financing, either with significantly lower sales of farm market conditions.
Also, many

additional pieces of evidence:

two

COMMERCIAL &

result

initiated.

projects

Recent

already

developments

These observations
outlook may be
follows:

ness
as

The

(1)

the busi¬

summarized

immediate

business

prospects are Adversely affected
by
strikes
in
basic
industries.
have

These

interri/pted the Au¬

tumn recovery
which

in business activity
inventory
re¬

reflected

plenishment,
normal

the

seasonal

operation

factors,

and v

stockoiling in anticipation of la¬
bor

difficulties..

work
more

The/bngejq these
continue,^ the,,

stonnages

significant will be their e£-'
^nnntirmed

nase

341

there

official warnings ap¬

are

v.7;"V,

pearing daily,

Tomorrow's

Whether

ings are justified,

Whyte

doesn't

con¬

What does matter is

cern

Says—

they may well lead to a

warnings

damage

permit

buy some of the stocks rec¬
ommended here a few weeks
to

By WALTER WHYTE=

Strike

me.

reaction which will

lead to new reaction. If
seen, it may present buying
opportunities for those who

may

missed the market.

ago. In some cases the recom¬
mended buying prices are now
too low.

down

low

would

some

of them get

first thought,

might cancel all
when the
the good accomplished in the
familiar averages were selling
at about 178, I recommended past few weeks.
a

if, these averages would get
down to the 175 level, the fig¬

here are the
buying points, even if the
any

new

case

expected would bring a stocks themselves aren't new:
further decline. At Bethlehem 26-27, stop 25; Celthe same time I wrote here anese, 25-26, stop 24; Kennethat I preferred buying when cott, 45-46, stop 44;
Illinois
a combination of news events central 27-28, stop 26; and Re¬
would
breed
pessimism so public Steel 18-19, stop 17.
You now hold two stocks,
that few people saw any im¬
mediate hope for the future. Denver & Rio Grande 22-23*
77
\:U*
*
7^7/
Forget the old stop of/: 21.
I

ure

halt to any

■:

figured this combination
would come from
the strike news, though at the
same time I emphasized that

of factors

strike

news

itself

not con¬

was

Stock

Put

28.

American Smelters 45-46 with

Keep the posi¬

stop at 44.

tion intact.
*

sidered bearish.
■

Incidentally I suspect

."77-;7

tlement

steel

the

set¬

strike

the

the low for

was

—

And instead of the

move.

steel and coal strikes

high for the move.
*

■

That left

with

[The
article
time

those of

with

They

are

this

expressed

not necessarily

coincide

Chronicle.

handful

In the past

week, however,
calm assured atmosphere

that has

pervaded the market,
seems to have slipped a couple
of notches (how d'ya like that
for mixed metaphors).
The

not

likely to continue for so long 7
period as to have a really sig¬

nificant

effect

business

ous

strikes is

now

being felt

in allied industries.

the

pattern

will lead

strikes

will

which

to the

the

and

Insurance

from

result

construction

high

level

future

portended by recent data
on
new
contracts, will provide
substantial support for business
in the early months of 1950, vAs 1950 progresses, we shall
prospects
of reduced,

(3)
face

the

spending for

some

of the

heavy-

port to the economy in 1949, e.g:^
automobiles, farm equipment, pri¬

construction,

business

and

any

those

of the
presented as

the author only.]

Eastern Pa.

Group

At least

activity.

ness

outlook

•

therefore, the

balance,

(4)

further

favors

duction,

business

industrial

held

was

America

Oct.

Monday,

substantial
adjust¬
but many
of the important heavy industries
still appear to face a correction.
A decline in the heavy industries
is usually more serious for busi¬
than

recession

Poole
was

Co.,

office

appear
may

Other

offi¬

squeezed

For
rely

lower

between

elected

Gordon

vestment

the

upon

The

conditions.

ness

cers

Crouter

Vice-

enterprise

such

Co., Secretary-Treasurer.

Executive

Pacific Coast

Exchanges'

Schwabacher: & Co.

Inc.7;:.■•;:-'r-'::-77':;7.-77■:

Members
New

New

York Stock

York Curb

8an

These

Exchange
Exchange (Associate)

Francisco Stock Exchange

Chicago Board of Trade
New York 3, N. Y.

14 Wall Street
COrtlandt 7-4150
Private

Wires

Teletype NY 1-928
to

Principal

Offices

Sao Francisco—Santa Barbara

Monterey—Oakland—Sacramento
Fresno—Santa Rosa

nominations

were

made

Barney
Co., Chairman; Gordon Crouter
of DeHaven & Townsend, Crouter
&

encourage

second

insure

Neither

problem
1950.

world

markets in amounts sufficient to offset those exports
we

wish to sell/ In brief, we

do not

appear

r
■
.

Heart of the Problem
We do not

see

how any one

could doubt that he is right

when he

ducers in this

likely to

were in full sway and which would
question result in cheaper and better
products both here and abroad. His specific remedies are
technical, and we do not profess to be in a position to
evaluate them, but we have little doubt that they are de¬

the end without

competition in domestic markets.
What

•.

Mills is

with

G.
forming R. G. Mills & Co.

LOUIS,

offices at

MO. —Robert

314 North Broad¬

Mr. Mills was formerly a
partner in Dempsey-Tegeler & Co.
and in the past was with the Met¬
way.

ropolitan St. Louis Co.

(Special

to The

now

supplement Mr. Taylor's

everywhere there

are

influential politicians, usually

V.
7

con¬

trolling politicians, who are quite certain that they can
substitute their petty wisdom for that of nature and
thus
kind.
in

greatly improve the economic condition of

man-

One must suppose

that the rank and file, at least
those countries where the people still really rule, are

*7 similarly affected with this modern virus of socialism,

-^communism,

Collin, Norton Adds

needed

similar account of what other countries are
doing in these matters, and a plain-spoken naming of
the myths and the popular misconceptions which permit, even stimulate, the growth of such mistaken policies
all round the world. Restrictions and all sorts of interferences with natural forces are omnipresent.
Almost

analysis is

Forming Own Firm
ST.

country to avoid the competition which would

obtain if natural forces

peace.

their

near

cousin, controlled

managed

economics.
The Basic

Financial Chronicle)

TOLEDO, OHIO — William J.
Bodine; William L. Day of The
has
become, - affiliated
Pennsylvania Company; Henry R. Whelan
Hallowell of Hallowell, Sulzberger with Collin, Norton & Co., 506
& Co.; Robert G. Rowe of Stroud Madison Avenue, members of the
New York Stock Exchange.
& Co. Inc.
&

;

ber of other laws which interfere with normal international

such

The need

Committee consisting of Nor-

bert W. Markus of Smith,

straight story7 We are ^ not

time that

and services

Henry R.
Hallowell of Hallowell, Sulzberger
& Co.; Wallace M. McCurdy
of
Thayer, Baker & Co.; William Z.
Suplee, of Suplee, Yeatman & Co.,

'7*7

particularly concerned about the amount of money the
taxpayer is sending abroad in one form or another, or
the likelihood that, given a continuation of conditions
as
they are at present, even those funds which go
abroad as -loans will presently prove in the event to
he gifts for all practical purposes.

Committee:

7 i';'-.7'-77

than reluctant to permit the entry of foreign goods into
our

Robert G. Mills Is

addition, the following were
named for three-year terms on the

v.-

in¬

and

real.
business

are very

solved in

Chairman, and Albert R. Thayer,
of Thayer, Baker & Co., Secre¬
&

.'.-V ■-•O

signed to eliminate, or at the very least, to reduce real evils
now rampant. He is also on strong ground in attacking a num¬

how
Schmidt

•' ■'

eternally right when he points out that at the
we are pouring money into Europe and
elsewhere, and are finding that, despite it all, the socalled "dollar shortage" continues, we. are. rather more

only to the paramount problem—
A.

hindrances

DeHaven &
Walter

■

points an accusing finger at our tariff rates and
conditions will become even more our tariff procedures. They are time honored and, in some
competitive, some profit margins circles, almost sacrosanct modes for permitting various pro¬
However,

longer term, we
business enter¬
prise and capital investment if
we are to have satisfactory busi¬

1950.

—7

He is

satisfactory.

sonably

must

the year 1949-

''77,T-;

to us to be a true and

average

1949, but the year
whole will probably be rea¬
than

(6)

for

seems

same

and employment
likely. Business
somewhat

prices,

not

1950

vorable to business.

chosen for

the

Chairman

■

Taylor's debt by reason of the fact that he has
call sharp attention to a continuation
even up to the present moment of much of the type of
thinking that is responsible for these deplorable results in
past decades.
7

The development of a pro¬
spiral in pro¬

prices and a relatively inflexible
cost structure, and the underlying
political situation will not be fa¬

A Factual Analysis

•

had the courage to

in the soft

will

tary-Treasurer.

Executed

this

rise in unemployment,

24, 1949. Wal¬
Schmidt,
Schmidt,

Of course, there may be some pointsat which one would
to argue the case with Mr: Taylor, but by and Iarg6

ments earlier this year,

does

■

was

^ant

pro¬

experienced

dine,

Orders

ciS-

of the nondurable goods industries

sylvania Group of the Investment

Crouter & Bo-

Securities

;

over

index,

the

lower

Association

subsidized,

laid upon the taxpayer,

the '
only exception being during the 'Twenties when a great
:7 many naive (and some supposedly not so naive) inves- !
tors appear to have provided the funds to finance the
strange foreign economic policies of this country. 7

the next 12
months, characterized by a decline

adjustments

nual meeting of the Eastern Penn¬
Bankers

not, had long thus been

and that the cost of it

while still, is-also in Mr.

rising trend, is not a guar¬
antee against fluctuations in busi¬
a

duction,
an¬

hardly fail to do—that export indus¬

unmindful of the fact that two deadly world wars took place
equipment. The avail-,
able evidence suggests a tapering r;
periody 7and;7that political s considerations: incident
off in this type of spending rather
thereto provided what was commonly regarded as compel¬
than a collapse to anything like
ling- reasons for some of this record. However, when dub
depression levels. Foreign trade
will provide less net stimulus for allowance is made for all such factors, the truth remains
the domestic economy next year. that much weight is left in the Taylor analysis. The country

(5)

PHILADELPHIA, PA.—The

worthy

and

plant

Townsend,

Pacific Coast

tries, consciously

nounced downward

Of IBA Elects

to us to have qualified as a

seems

indeed he could

goods which gave such good supf?

vate

nothing particularly "healthy" about this :
In this latter conclusion the 7

competitor of the late President Coolidge as a master
of understatement. He points out in this connection —

the

immediate

the

for

was

gentleman

re¬

National Service Life

deal of which later went into de- '77
Taylor concludes -

On the basis of such facts, Mr.

that there

building of inventories. This, to¬
gether with the increased spend¬
ing

offset by private donations.

"favorable" trade balance.

The ultimate-settlement of

(2)

was

fault.

they will affect the timing.
these

billion to be accounted for. A part
Some $10.5 7
settled with funds invested abroad by Amer- 7
was

ican citizens, a good

although

developments,

sum

billion

be the worst for ,any month
in 1.949. However, the strikes are

are:

cumulative effect of the vari¬

of this

may

(Continued from first page)

many

This leaves $33

October

ter A.

for

goods sector of the economy.

the

views

Whyte.

•

only two
stocks to boast of. 7 Having
missed the first move I might
have
switched
completely,
chased them and bought them
at the market. Bitter experi¬
ence. however, taught me the
futility of such a practice.

statistics

and further price weakness. Some

and

theories

employment,

Business

ness

Thursday.

—Walter

generat¬

ing apprehension, they
brought about a rise in stocks
to what was practically a new
;v

More next

of produc¬
and
trade.

Government spending,

Apparently I misjudged the
would not be bullish. Partic¬
temper of the market. First of
all the averages didn't get ularly if it involved a raise
in steel prices which would
down to 175. The low, the day
be passed on.
the
column was written —
about 178

tion,

about

now

stop at 25. You also have

your

and

the aggregate measures

dividend

and

list of stocks when, as,

industries

allied

if not most of these obligations are long in
default, and (although Mr. Taylor refrains from saying so)
the remainder for the most part are destined to be at one
time or another as things are now going.
though

(Continued from page 33)
fects

full blown

mean

reaction that

A few weeks ago

Tor Business

shak¬

head

these

that

As We See It

The Outlook

•

Markets
Walter

Thursday, October 27, 1949

CHRONICLE

FINANCIAL

COMMERCIAL

THE

(1682)

These

Remedy

underlying philosophies touch international eco¬
nomic relations, both directly and indirectly. It has
long beea
argued by these "modernists," many of them sincere, some
cf them learned in the lore of the literature, most of them

(1683)

quite ignorant of what they are talking about, that once
all business throughout the world' id controlled and directed
(if not actually owned and operated) by government, the
difficulties

building ^activity. In addition,

one

expect that next year "a

may

large .amount

housing

bonds

will be offered in the market. The

through the sale of bonds is also
reduced.

Hence, while the imme¬
diate outlook is for a large supply
of bonds and mortgages, match¬
ing the supply of funds seeking

preventing ^depressions, and the task of en¬ International Bank for Recon¬
riching the masses, and all the rest that goes Atojpaake up struction and Development, in all investments, in the long run, and
Utopia, would be immensely easier. Then, so it is said, only probability, will also offer a con¬ particularly if pension plans em¬
siderable

working agreement among nations would be necessary to
assure permanent
prosperity. Of course, this is nonsense,
pure and simple, but more important for the moment is the
fact that nationalism cuts

-gives hirth to innumerable restrictions

lines.
:

the world

over

■

at boundary
" ^ .

securities

distant

future.

great

the

labor,

substantial, the
supply of funds seeking an outlet

recently slave labor, abroad is put
sleep; farmers are made to realize that they should
stand on their own feet; labor understands that it must
or more

bonds

and

mortgages

also

bound to be great. The

the

people

savings of
become largely

have

institutional in

character, that is,
.primarily through in¬
surance, pensions, and by deposits
in
savings
institutions.
If
the

receive what is proportionate to its

people

production—as com¬
petition from abroad would help to make certain; and
that what our economy most needs, and what is most
needed the world over, is that type of full and free com¬
petition which really is the "life of trade."

save

volume
as

employment is large,
it promises to be, and the na¬

tional

income

remains

savings of individuals will
probably increase. Moreover, pen¬
sion plans are being adopted by
corporations.

many

majority
It,

has

the

been

^Treasury's ^policy to keep the debt
burden

low

therefore

One

possible,

and

assume

that

; may

the

Treasury will not be willing
to increase materially the rate of
interest it has to pay. This will
tend to keep interest rates down.

commercial
to

banks

will

endeavor

of other

high-grade bonds. On the
hand, if the demand for

substantially. Most of these
obligations are -serial -in character

strong, and
should lead to

especially df this

and

are

increase in the

V/4%,

certificate rate

commercial banks

many

considerable buyers of those with
a
maturity up to 10 or 12 years.
This will tend to prevent a de¬

long-term government obligations.
In that case prices will go down

cline

and

short- and

rates.

the

medium-term

whole,

therefore,

the net change in short-term rates
is bound to be small.

The
the

banks

policies

loans

will

to
depend

customers,

siderable

rate, or
charged by

interest

of.

commercial

their

will

liquidate

part

their

extent

con¬

a
on

the

authori¬
ties. If the demand for funds by
business continues, then the pres¬
ent 2% rate in all probability will
be maintained. - If, on the other
of

the

Reserve

provide
white

pensions
for
yet being wide¬

spread. In all likelihood, however,

pension plans for
workers will spread very

manual

rapidly and within the next few
workers in

years

all the leading

industries may be covered by such

As far

as the capital
concerned, 4t >makes
very little difference whether the
pension is <c o 111 r i b u t o r y or
whether it is paid entirely by the
company. The fact remains that
the sums accumulating in pension

programs.

market

funds seek

outlet in bonds and

yields up, and this trend will
be accompanied by a correspond¬
ing increase in yields of AAA

mortgages, and therefore, the sup¬
ply of funds available for invest¬
ment in fixed-income-bearing se¬

corporate bonds.

curities is bound to be very great.
What
effect this
will
have on

over-the-counter

rate

plans

In analyzing

the forces that will
operate in the long-term capital
market
it
may
be
taken
for

granted, however, that the 2V2%
rate on long-term government ob¬
ligations will remain. It is not
likely that in the foreseeable fu¬
ture the Treasury will offer any

long-term interest rates

can

read¬

ily be foreseen^
The

the picture is the

fiscal position
of the government.
If, for ex¬
ample, the budget of the Federal
Government during the next few

lowering of the discount rate
and of reserve requirements. This

years
should be balanced on a
long-term
obligations
with
a
higher coupon. The experience of cash basis and the Treasury should
not need to have recourse to new
1949 appears to
indicate, more¬
over, that no
matter how large borrowing, long-term rates, under
the demand for long-term capital the great pressure of the accumu¬
lation of funds in pension funds
may be and no matter how great

the

hand, business activity should de¬
cline
and
the' volume of bank
loans be reduced, one may expect
"a

turn
.

charged
tomers.

the

banks
in

But

the? change
As

bound

decline

this

bring about
prime
rate

to their cus¬
respect, also

is likely to be small.

regards

rates,

short-term

draw the con¬
clusion that any changes that may
take place in the near future are
,hound to be yery model ate in
therefore,

one

character.

may

certificate

The

fluctuate" between
1V4%. The discount rate

may

rate

1
and
of the

Federal Reserve Banks will either
remain at 1V2 %
to

rate

'or it

may decline
over-the-counter

The

will either
remain at the present rate of 2%
or it may decline to IV2 or 1 % %.
A. preferential rate for short-term
government obligations may be
established. A material change in
prime

paper

rates
is
not indicated,
partly. because of the needs of
the Treasury, which is confronted
with the task not only of refund¬
money,

ing fbillionsef»doUars of .outstand¬

ing .obligations hut also of bor¬
rowing new money. Moreover, as
the experience of 1948 has clearly
demonstrated,

the Reserve au¬
have
determined
to

thorities

government bond
orderly and any change

maintain
market

the

permit

will

they

will

only

minor in character.

liquidation of long-term gov¬
ernment obligations by financial
institutions may be, the 2M>% re¬
will be maintained. The fact

turn

that the upper

level on long-term
rates seems to be

government
fixed
rate

also

sets

pattern for

interest

other

the

high-

grade long-term bonds. Never¬
theless, a widening in the spread
between
government and- AAA

some

Rates

extent the outlook for

rates of interest will
depend upon the movement of
short-term rates. It is evident that
long-term

if the
to

certificate

1%,

and

rate -is lowered

particularly

action is accompanied by a

tion

the

discount

rate,

if-this
reduc¬
many

the

companies

hands

insurance

savings

and

institu¬

economic

paper

liberty)

r,The farm parity plan was orig¬

inally passed "to bring about or¬
derly marketing of farm crops"—
it has since degenerated into a
successful
haethod
to
buy
the
farmer's

edly

vote—so

the

Truman

when

reelection
New

stated

stump

last

York

"Times"—Washing¬

"President
Democratic

Truman

farm

today

gress

1949—John

11.

special dispatch states:
cautioned

the

government is
large. In the fiscal year 1948-49,

against

price

lower

supports (House bill provides for
raising to 90%) for basic com¬

modities, lest the party

the

lose

farm vote in future elections. Ac¬

cording

that

the principal point m&de

was

those .who

by the President at
conference
farm

with

leaders

Brannan,
ture."

when the economy of the country
whole was on a high level and

attended,

White House

Congressional

and

Charles

Secretary

Agricul¬

be only limited in

can

character.
In

addition

exercised

over

the

influence

the capital

market®

one

indefinite

period.

policies of the monetary!
Nevertheless, short of an emer¬
authorities, long-term money rates;
gency
or
a
material decline in
will also be strongly influenced;
business
activity,
accompanied
by the demand for and the supply
by a sharp reduction in the rev¬
of capital. In the immediate future
enue
of
by

the

demand

for

capital

will

the

substantial

Government

increase

its

and

in the, form of cotton and

wears

including what it smokes,

wool,

tobacco.

The

this in most

Government

does

by buying, and
by making loans to farmers which
cases

in effect buyin g; for the loans

do not need to be

repaid...(There
are
other methods, including di¬
rect price fixing.)
To the average man's
under¬
standing, all this is economic im¬
becility. But it is with us; nothing
done in this Congress aimed to

terminate

expen¬

it.

The

tendency

price support from the beginning

to about 12 years will be ac-;

quired by the commercial banks
while the longer-term maturities
will be bought
by institutional
investors

the

coupon

satis¬

back

into

decrease.
sire

bonded

the

business

Most

have

will

also

corporations de¬
certain ratio of

indebtedness

equity

crease,

because of the high level

ability and willingness to borrow

Wash¬

Because since the end of

they

war

single

have

not

made

return to the only
sound currency. The same indict¬
ment must
rest almost without
move

exception

against the heads of
life insurance companies, the
of our larger commercial

heads

banks,

the

heads

banks—and

there

are

citizens'

all

the

savings

our

places

enormous

where

deposits

savings.

Where is the moral fibre of

leadership?
Where has
in principle gone?

our

be¬

our

lief

Three years ago French
citizens,
under
their
government's pres¬

the

put

sure,

billion

later,

equivalent

into

Three

1949,

their

worth 10 cents
is

what

two

French
years

bonds

were

the dollar. This

irredeemable

does

and

dollars
bonds.

Government

whether

paper

France,

in
country,

easy
to appropriate and to
spend when all we have to do is

to start

the printing presses

ing.

"It can't happen

billions

roll¬

here."

Savings

Bonds.

Ten years later, in 1949, the 1939
dollar is worth 53 cents (Federal

Reserve

.1949,

Bulletin

1133).

in the
in 1939.

than

We may

power

figure of Sept.,
It
purchasing
S.

ignore, but

47%

less

cannot

the

teachings of history.
Economic history records that

escape,

eventually

every

country

aban¬

dons irredeemable paper currency
and returns to convertibility, to
to

monev

or later. But losses
citizens will be far greater

Today,
price
support
covers
practically everything raised on
a

farm.

Most

governments
(including
own) with irredeemable pa¬

name a

few other big pres¬

the

groups;

services,

armed

Our country will
convertibility and hard

money.

sooner

our

later, the longer convertibility is
delayed.
It
is imperative
that
in positions of responsibility

men

get mad and

get busy with their
representatives in the House and
in

the

Senate

extreme

gold

basis

Representative

Rohert P.
Robert,

pectedly
ville.

connected

Co..

need

is not

better

dollars

groups
as

much

dollars; dollars that buy

3262.-

10,

died

1949.

unex¬

Nash¬

Ind., where

he had gone on a visit for several

-and many others.
one thinks, "I'll
get mine,"
ignoring the fatal cumulative ef¬
fect of satisfying all these de¬
these

our

L*mb Dead

Countv.

Brown

bureaucracy,

all

the

provided

Lamb

Oct.

Each

What

them

Reed's

days.

mands.

show

inherent

danger

irredeemable paper currency and
to enlist their support to return

old age pensions, the labor unions,
veteran
groups,
the intrenched

'
the

For

last
with

ten

years

Alfred

Chicago.

was

O'Gara

Previously,

had been with several other

com¬

panies.

including
the
National
Bank and the Continental

City

Illinois National Bank.

During World War XI he served
the

Production

War

Board

But what about the end

The

road?
his

farmer will

of this

still have

buildings, his machinery, his
but

his

money

sav¬

ings banks, in commercial banks
his

annuities, his insurance prob¬
will be worth 10 cents or

ably
less

the

change

our

dollar

course.

unless
He

get his like all the other

is out to
pressure

groups, but he, like them, will
end up with bales of paper money.
He shuts his eyes to the fact that

bis

votes

being bought with
money, and you bankers

his

industrial

engineer,

while-on

& Co.

Mr, Lamb

was

born in

have remained si¬

Spring¬

field, Mass, July 4. 1891, gradu¬
ated
from
Torrington
(Conn.)

High

School,

the "Literary
Connecticut

Institute
He

and Jater

attended

Institute College in
and

.the

American

Banking.

survived

his widow,

the former Gertrude J.

Krai, 1646

South Lombard Avenue, Berwyn,

safeguard-'the w^lua and

money

year's absence from Alfred O'Gara

are

and by individuals sub¬
capital. If the amount of equity his own
ject to . high income taxes. The
supply of mortgages also will in-5 capital does not increase, their •who Should
factory

the

masters

hard

"Crop Control" law,
which was the beginning of the
present system of price support,
covered
only
five
so-called

livestock,

pressure

ington.

silence

your

allegiance

your

political

your

return

the

particular, the need for construc¬
tion of new roads is very great,
and one may therefore expect a
large flotation of tax-exempt se¬

resulting from the wide
adoption of pension plans.
The
situation is further aggravated by
the fact that the supply of equity
capital is rather limited, while
earnings of corporations plowed

proclaim

you

called

term tax-exempt

of funds

have not told him what

happening.

has been to expand. The 1938 law,

supply of long-;
ditures, the volume of new secur¬
securities is con-! ities
that the Treasury will offer
stantly
increasing since public' in the future
may not be suffi¬
works are expanding rapidly.
In) cient to counteract the

The

page 15)

lent and

Wake up! It is happening here.
In
1939
Americans
subscribed

on. a

more,

substantial.

sure

these circumstances

therefore expect that the def¬
icit of the Government will con¬
for

••

price support is

grown

let

can

tinue

•

■

practically everything
farm. This is the
same as to say that it keeps up
the
price
of
practically every
food the public eats, and of what

achieve these aims.

Under

•

price

essence

satisfactory, the our
deficit of $1,800
per
currencies are engaged
in
fiscal
corporate bonds may take place,,
buying the people's votes with the
as it has often taken place in the
year
the deficit may run from
people's own money.
past. Many large-scale investors $4 to $8 billion. While Congress
This technique has permeated
consider the spread between gov-; preaches the necessity of curtail¬
many phases of our political life
ernments and AAA corporates too
ing expenditures, balancing the
and is used freely by both par¬
narrow at present and expect it toj
budget and repaying the public
ties. In addition to the farm bloc,
increase. But in any event, the| debt, no measures are taken to
widening

interest

China, or in any other
including the United States. And
the principal reason is that it is

The

was

had

Treasury

down

this: the Government supports the

as a

employment

rates.

of Con¬

leaders

tions, will probably decline from
present 16vel. Of course, a "basic" crops—corn, wheat, rice,
different situation will prevail if cotton, tobacco.
deficit

further

press

our

year.

ton—^dateline Oct.
D. Morris'

repeat¬

President
campaigning for
by

the
the

great

to exceed the demand and thus

currency.

million. During the present

curities. Those with a maturity of

5*he Outlook for Long-Term

and

are

uncertainty

principal

and

for bales of

the

the adoption of

bring about a
further increase in prices of longterm government obligations ac¬
companied by a similar movement
other

banks

workers,

in turn is bound to

funds should continue

commercial

far,

executives

manual labor not

tax-exempt securities will also in¬

the

these

collar

their
earnings
by
lengthening their maturities. This
recoup

On the other hand, the supply of
crease

pensions

(Continued from page 9)
obligations.

(Continued from
political

high

level,

The Outlook for Interest Rates

are

Government Spending

income securities may be

The Gold Dollur-A Check

past,

However, while the demand for
will

workers

primarily because capital expen¬
ditures by corporations are de¬
creasing.
\ '
>
'
capital

manual

adopted, the supply of
funds seeking an outlet in fixed-

The

pauper

too

supply-of corporate bonds will not

•

At-home Mr. Taylor and the others in agreement
with him will not get very far until the old gag about
-

volume

not

and

all this all

across

the

bracing
widely

three

daughters

grandchildren.

and

four

COMMERCIAL

THE

(1684)

FINANCIAL

The following statistical tabulations cover production and
shown in first column

either for the week

are

Thursday, October 27, 1949

other figures for the latest week

month* ended

CHRONICLE

that date,

or,

month available (dates

of quotations,

cases

are as

of that date)

Latest

AMERICAN

IRON

Equivalent

Year

Week

Ago

84.6

98.9

166,COO

172,000

1,559,600

ALUMINUM

1,782,600

short

Crude

PETROLEUM

in the U. S.

55,777

54,181

52,937

53,809

48,107

11,382

80,201

71,730

135,196

2,083,014

2,086,757

1,936,205

1,881,669

1,891,882

128,235

140,607

136,264

60,738

58,611

July______—■

INSTITUTE:

oil

output—daily average (bbls. of 42 gallons each)
Crude runs to stills—daily average (bbls.)
Gasoline output (bbls.)—...
Kerosene output (bbls.)—

5,043,550

115,324,000

5,335.000

5,306,000

17,978,001)

18,107,000

1,865,000

2,190,000

17,845,000
1,759,000

17,424,000

15
Gas, oil, and distillate fuel oil output (bbls.)
Oct. 15
Residual fuel oil output (bbls.)—
Oct. 15
Stocks at refineries, at bulk terminals, in transit and in pipe lines—.
Finished and unfinished gasoline (bbls.) at
Oct. 15
■'i
Kerosene
(bbls.) at
Oct. 15
Gas, oil, and distillate fuel oil (bbls.) at„—
Oct. 15
Residual fuel oil (bbls.) at
J
Oct. 15

6,752,000

7,131,000

6,667,000

ALUMINUM

5.609,000

Oct.
Oct.
-Oct.
Oct.

5,014,800

4,845,300

5,633,600

WROUGHT

PRODUCTS

OF COMMERCE)—Month of
Total shipments

Revenue

OF AMERICAN

RAILROADS:

AMERICAN

ASSOCIATION

GAS

7,659,000

7,363,000

7,485,000

gas

102,707,000

103,331,000

91,483,000

Natural

gas

sales

27,758,000

27,548,000

26,877,000

Manufactured

86,952,000

85,800,000
68,222,000

26,436,000
80,114,000

74,278,000

Mixed

68,527,000

CONSTRUCTION

—

August:

69,081,000

<•

(M therms)-

sales

gas

sales

gas

Month

ENGINEERING

Oct. 15

574,228

743,022

912,957

§506,766

Oct. 15

519,010

570,575

therms

Public

$121,542,000

$143,697,000

$188,659,000

Oct. 20

62,894,000

66,327,000

95,673,000

55,204,000

and

Oct. 20

58,648,000

73,804,000

51,459,000

77,370,000
59,959,000

92,986,000

Oct. 20

64,267,000

—Oct. 20

municipal————

Federal

7.189,000

17,411,000

28,719,000

62,528,000
11,276,000

—

ASSOCIATION—

BOARD

—

Bituminous

FEDERAL

September

and

lignite (tens).,
anthracite (tons).:

coke

Oct. 15

(tons)

2,210,000

8,435,000

Oct. 15

2,390,000

1,259,000

1,099,000

944,000

BUSINESS

342

3,300,79S

$101,080,000

$98,804,000

$104,754,000

$29,692
7,830
12,875

•$30,304

$30,236

SYSTEM—

thousands

INVENTORIES,

MERCE—Month

DEPT.

July

COM¬

(millions

$):

Manufacturing
Wholesale

12,463,000
1,225,000

Oct. 15

•342

•2,968,318

GOVERNORS

RESERVE

(in

<•:

—

(U. S. BUREAU OF MINES);

coal

Pennsylvania
Beehive

342

3,497,043

reporting-—
transported (tons)--—.

Retail

COAL OUTPUT

$129,008,000

construction

State

THE
of

69,301

carriers

freight

DEBITS

—Oct. 20

construction J

Private

•

construction

motor

722,490

NEWS-

therms)

August:

Volume

Month

Number

§583,913

RECORD:
Total

Month

59,558,000

of
Total

BANK

CIVIL ENGINEERING

For

—

theims)

102,767,000

freight loaded (number of cars)_,
freight received from 'connections (number of cars)

August-

2,289,000

AMERICAN TRUCKING

Revenue

(DEPT.

(thousands of pounds)_____

7,425,000
9,163,000

——

ASSOCIATION

Year

2,133,801

tons)—Month

Stocks of aluminum—short tons—end of July

AMERICAN

Ago

(BUREAU OF MIXES)—

Production of primary aluminum
(111

Month

Latest

9.3

•

Oct. 30

castings (net tons)

Month

9.0

Oct. 30

(percent of capacity)

to-*-

Steel ingots and

Month

INSTITUTE:

STEEL

AND

'Indicated steel operations

2,700

•2,300

10,700

150,000

Total

$50397

COPPER

INSTITUTE—For

month

•7,774

13,498

*$51,510

7,930

•13,432

$51,664

Sept.:

Copper production in U. S. -A.—
DEPARTMENT

STORE

TEM—1935-31)

SALES

INDEX—FEDERAL

SY8-

RESERVE

AVERAGE—100

Crude

Oct. 15

288

297

(tons

Refined

331

315

2.000

lbs.)

MDISON

(in

output

FAILURES

kwh.)_

000

(COMMERCIAL

STREET,

INSTITUTE:

ELECTRIC

Electric

INC.

AND

——

IXDUSTRIAL)- -DUN

5.417,877

5,480,735

5,555,641

5,538,885

BEAD

103,115

lbs.>

stocks at end of period

AND

AGE

COMPOSITE

.'Finished

Pig

steel

PRODUCTION

Oct.

iron

(per

Scrap steel

172

169

124

PRICES:

ton)

gross

IOBTAL PRICES

?3.705c

3.705c

DEPT.. OF

AGRICULTURE—As

$45.88

$46.91

Oct. 18

$26.50

$26.58

$27.42

$43.16

(E.v St M, 3, QUOTATIONS):

Straits
Lead

tin

(New

Lead

(St.

-Sine

17.550c

Oct. 19

17.325c

Oct. 19

at
at

(East St. Louis)

-Z._wi.

at—

17.325c

23.200c

17.550c

23.425c

96.000c

103.000c

13.000c

13.750c

15.125c

19.500c

12.800c

13.550c

14.925c

9.250c

9.2o0c

10.000c

15.50UC

MOODY'S BOND PRICES DAILY AVERAGES;
U.

Government

Bonds—

RAILWAY

HOUSEHOLD

103.87

100.62

Factory

115.04

110.88

Factory sales of

120.84

121.04

119.00

119.20

114.27

110.15

106.74

106.56

106.39

103.97

..—Oct. 25

109.60

109.42

109.60

106.5'.

Oct. 25

116.61

116.41

116.22

119.20

119.41

114.66

sales

323,789

—...

MAGNESIUM

ironers

$209.7

(units)

WROUGHT

PRODUCTS

OF COMMERCE)—Month

Shipments

of August:

pounds)

(in

PERSONAL INCOME IN THE

UNITED

STATES

COMMERCE)—Month

July (in billions):
personal Income
Wage and salary receipts,

2.45

2.90

3.11

2.61

2.60

2.8f

Commodity

disbursements
producing industries.

2.70

2.69

2.9-?

Distributive

2.94

3.If

Service

3.35

3.36

3.37

3.51

3.19

3.20

3.19

3.36

-Oct. 25

2.82

2.83

2.84

3.0-:

Oct. 25

2.69

2.68

2.92

Total

_Oct. 25
.Oct.

industries

employee

339.7

335.7

344.4

404.6

ASSOCIATION:

.Oct. 15

191,375

282,832

197,991

185,61C

_Oct. 15

203,450

201,544

205,128

192,53f

-Oct. 15

9r.

Oct. 15

422,552

440,721

369,573

384,134

labor

Personal

AND

DRUG

REPORTER

PRICE

126.7

129.3

143.1

cZZifeS

INDEX

DEALERS

FOR

AND

THE

ODD-LOT

SPECIALISTS

ACCOUNT
THE

126.1

ESTATE

REAL

AREAS

—Month

Banks

Dollar

value

by dealers (customers' sales)
orders—Customers' total sales

Customers'

short sales

Customers'

other sales

Number

Customers'

bhort
other

sales___

Dollar

625,857

537,196

351,898

4ba,uuo

$20,753,844

$14,<312,271

$20,035,511

23,389

value

IIZZZZZZZII

24,496

15,141

182

119

24,377

15,022

654,991

15,421

637,455

6,484

ort'

15,49F

119

23,207

■

389,619

412,431

4,640

4,760

2,983

■

648,507

632,815

384,859

409,448

$21,501,537

$20,224,962

$12,680,631

$14,924,113

242,250

274,410

162,960

117,430

242,250

274,410

162,960

I- Zibet'
8

.Oct.

Round-lot purchases by dealers-

NEW

215,070

SERIES- -U.

DEPT.

202,480

LABOR—
■

117,430

117,330

187,710

Z'Z-Z'Z;

ZZ'/:Y 'Zv
^

.Oct. 18

152.1

154,0

159.6

160.1

163.1

186.0

.Oct. 18

160.4

*165.9

164.0'

178.1

.bet. 18

144.9

•145.0

145.5

153.5

-bet. 18

137.6

*137.7

139.6

$319,534
84,479'

88,578

62,343

171,434

160,655

184,270

167,580

.__

institutions

193,910

67,255

lending

79,352

218,682

151,692

139,81T

$953,520

$1,024,323

$61,263,278

$105,256,808

222,673
73,550-

Net

131.2

*131.2

130.3

137.?

169.2

170.5

1^2."

183.3

189.4

189.3

203.5

CLASS

Commission)—

July:

$50,337,003

railway operating income

Other

23,408,718

income

67.919.023

:—■

16,459,269-

84,671,996

17,582,020

income

Total

121,716,077

Y Miscellaneous
Income

deductions

available

after

Income

Other

for

fixed

charges

5,056,195-

82,089,225

116,659,882:

45,505,179

80.074,462"

3,187,978

(way
of

structures

3,507,934

3,029,253

-1

deductions
income

Depreciation
Federal

2,482,761
30,368,994

fixed

charges

2,582,771

65,436,262

income

from

26,861,060

42,475,926

76,886,484

34,029.952

34,029,070

31,221,198

equip.)—

1,372,672

1,373,752:
48,854,378

12.844,577

4,911,593

1,055,752

1,471,828

1.87

2.24

3.19

$1,572,750

—;

1,372,995

6,139,277

projects

taxes—

23,749,206

3,996,045

defense

17,434,132

$3,762,350

$7,174,000"

$880,500

$897,000

$990,00®

490,660

income

455,500

605,508

$256,708,917

$255,879,042

5,698,886

4,417,886

$251,553,319
3,995,156

appropriations:
stock

common

preferred
of

stockto

income

RECT

MARKET

fixed

charges.

TRANSACTIONS

DI¬

SECURITIES

GUARANTEED

AND

148.4

-bet. 18

.Oct. 18

Building materials

—

(Interstate Commerce

TREASURY

.Oct. 18

Foods

associations

$1,054,843

RYS.

Ratio

1926=100:

$305,568

SAVINGS

omitted):

Savings banks

PRICES

$341,374

NON-FARM

companies

Amortization

■i
.

11.1

190.2-

CORPORATION

of August (000's

companies

Dividend
.Oct.

WHOLESALE

SELECTED INCOME ITEMS OF U.

Net

Oct.

16.fr

12.1

*191.8

16,929

$23,460,428

^ct

Round-lot sales by dealers—

12,586

QCt"
""Oct
-Zoct'

sales

Customers'

18,580

8
•

Oct
__

2111 III
salesIZIIIIII II"

total

20,648

*17.3

17.3

2.J?
2.0*
50.8

12.1

income

S. —FEDERAL

Loan

2.2

*46.8

191.1

.___

INSURANCE

and Trust

Month

shares—Customers'

_0ct'

ZZoct

purchases

Number of

Miscellaneous

qcj

~~~
_

Odd-lot

dividends—

and

Total

orders

Number

income

payments

FINANCING

LOAN

AND

2.3

23.

2.1
44.5

income

Individuals

ODD-

STOCK

EXCHANGE—SECURITIES EXCHANGE COMMISSION:
Odd-lot sales by dealers (customers'
purchases)—
Number

19.4

——

rental

nonagricultural

Mutual
LOT

16.9

20.5

social

for

income

interest

Insurance

Oct. 21
STOCK TRANSACTIONS

39.8;

17.1

contributions

and

transfer

Savings and

PAINT

•

insurance
Other

Total

AMDL,

60.7

•40.4

Government
Less

Total

•58.3

total

employer

Proprietors'

(tons)

136.8

58.1

industries

Oct. 25

....

134.fr

—_

20.6

2.22

2.90

-Oct. 25

MOODY'S COMMODITY INDEX.

*134.0

•136B

17.D

2.22

-Oct. 25

$214.5.

133.7

135.9
40.2

2.21
2.90

-Oct. 25

Baa

•$232.4

—

.Oct. 25

Percentage

35,203:

(DEPT.

-Oct. 25

received

497,000*

HOME

(units)

Total

■

Aaa

Orders

748,000

ASSOCIA¬

_Oct. 25

-NATIONAL PAPERBOARD

200,900
17,700

362,16!>

32,300

IRONERS

(AMERICAN

washers

(DEPARTMENT

108,892:

Not avail.

AVERAGES;

U. 8. Government Bends

28,731

111.81

Oct. 25

Group

DAILY

7,178

22,203

116.02

YIELD

5,305,456

TION)—Month of August:
103.92

_Oct. 25

BOND

(number
__

AND

SIZE

115.04

Railroad Graup

.MOODY'S

—

6,141

MANUFACTUERS'

120.84

Baa

Industrials

5,309,240

671,000

WASHERS

Oct. 25

Group

cars)

___

115.04

—

Utilities

of cars)—

103.92

Public

(AMER¬

: '

Oct. 25

COMMERCE):

Backlog of orders at end of month

Oct. 25
—_i_Oct. 25

....w—

14,868,000*

CAR INSTITUTE—Month

(number

Oct. 25

Aaa

September:

Deliveries

STANDARD

Average corporate

(DEPT.

CAR OUTPUT—DOMESTIC

LAUNDRY

•

23.003,000

14,943,000 •:

19.300c

Oct. 19

_______

17.325c

Oct. 19

York)

Louis)

——.—Oct. 19

—Oct.19

;___

—1—w—

York)

GINNING

Running bales (excl. of linters to Oct.

ICAN

refinery at——..

Export refinery

COTTON

FREIGHT

Electrolytic copper—
Domestic

25,907,000

3.720c

3.705c

Oct. 18

(per gross ton)

25,907.000
15,446,000

181

Oct. 18

72,215

Production -500-lb. gross bales—

lb.)

(per

122,93$

(tons

Acreage ■■/'
IRON

90,739

217,167

lbs.)

ACREAGE

102,796

79,949

of 2.000

88,105

85,577

64,237

r__

2,000 lbs.)

(tons

copper

2.000

COTTON

..Oct. 20

Refined

_Oct. 22

*62,279

193,890

(tons

Deliveries to customers— *

let. 18

.Oct. 18

116.5

116.4

165.8

117.4

135.7

OF U.

A.—Month of September:

Net

sales

Net

purchases

UNITED

—

STATES

BUREAU
(000's

———

—

EXPORTS

AND

CENSUS—Month

IMPORTS—

August:

omitted):

Exports

;

•

Imports

Special indexes—
UNETED

Grains

.Oct. 18

;

152.1

STATES

•Revised
▼ear*

1941

1946 10
to

figure.

1948

skins.

*arreIs of foreign

date

inclusive
inclusive.

Reflect?

I
^Reflects effect

on the

155.2

197.1

195.5

208.1

252.4

-Oct. 18

218.2

217.5

236.1

254.6

General

.Oct. 18

and

156.4

.Oct. 18

Meats

Hides

201.1

207.8

198.9

203.7

Computed

•

171.1
r

tThe weighted finished steel composite was revised for the
avera®e product shipments for the 7 years 1937 to 1940 inclusive and

crude runs.

five-day week effective Sept. 1, 1949.

-•••.

...

GROSS

DEBT

DIRECT

AND

GUARANTEED—(000's omitted):
of

Net

Sept.

fund

balance

annual

debt

•Revised figure.

rate

2.224%

$251,010X31

2230%

$251,461,156

2.235%

$247,558,163

Volume 170

Number 4850

•

THE

COMMERCIAL & FINANCIAL CHRONICLE

(1685)

not earnings enough to
buy every¬
thing I wanted." "■
u
"

(Continued from page 7)
favorable

side.

industry
of

The

;

steel

and

its

j selves

automobile

is the largest

consumer

will

costs

just when Detroit dealers

The effect of devaluation

go
are

porting that discounts off
prices prevail for all makes

there

and

cleaners

tors,

The point I

list

cept Ford and Chevrolet.
How General Situation Shapes Up
let's

situation
small

how

see

shapes

setbacks

the

general
The several

up.

that

business

nas

suffered since the end of the war
have confounded not a few busi¬

forecasters.

ness

started
other

least

in
in

were

they

for

the

thought

usual

post-war

is boiling.

course,

big

short

business.

interest

There is

consumer

supports

kept

for

setback

commodity prices early this
reasonable

has

nouncement of the Marshall

which

the short

corn

Plan,

and the coal-

crop

steel settlements.
While

these

worked

factors

New

were

when

they
are

practice

Deal

bitterly

were

,■

■

schemes

criticized

proposed

were

accepted
and

■

and

with the idea of mak¬

cases

decided

there

was

advantage

inventory
has

Retailers

course.

volume

bulwarks

proper

ing

prices

that

will

Capital Goods Expansion Ebbing

ago.

The Federal Reserve index
of industrial production made 195

seems

billion

agreed

now

that

fluence

was.

the

think

the

basic

bulging

is
in¬

public

pocketbook.
For. - instance,
the
Federal Reserve survey. of . con¬
sumer finances shows
that early

And

October and (stayed there for

another

month.

Then

the slide
31% of the spending started and bv last
July-4he in¬
units considered themselves "bet-, dex was
162.

in 1947

some

Thus, the slump in
,

ter

off"

than

earlier

year

against only,(.20%: in .1946.
For

the

this

1949

year

revealed

that

the