Babson's Authentic Statement 5 By Roger W. W Babson Babson's Babson 5 Business and Financial for 63 The business situation will vary with d different industries and hence with different cities cit cit- ies Some defense centers will boom boron steel cities will still find Hit flit going tough but better bet bet- ter than a year ago Considering Considering Considering Consider Consider- ing the high level of or the past ten years ears it will not be surprising surprising sur sur- for 1963 to show a moderate moderate mod mod- erate crate decline in business If II so it should come conic in the second second second sec sec- ond or third quarter with recovery recovery recovery re re- covery in the fourth quarter followed by a good 1964 1961 Disposable personal income will wili remain high With increased increased increased in in- creased savings deposits and little change in the thc cost of or living living living liv liv- ing the public should continue to spend freely Creely especially if merchants maintain their advertising advertising advertising ad ad- outlays Inventories will rema i n about the lie same during 1963 But government spending will increase over 3 billion largely on defense and 2 billion on new roads Whether manufacturers will hike their expenditures for new machinery machin machin- ery in 1963 in view of oC the depreciation depreciation de de- tax ax credit I would not now forecast All this means that business and employment ment for your our city in 1963 will twill depend largely upon upon upon up up- on the attitude of or its leading businessmen If they will be optimistic and spend more on new plants advertising and salesmanship we should have I not nothing ing to fear v v STOCKS AND nON BONDS OS My 1 father used to tell me It lit is okay Roger for you to tomake tomake tomake make forecasts forecasts but but neel never new nev er el put dates on them I forecast forecast forecast fore fore- cast that the Jones Dow-Jones Industrial Industrial Industrial Indus Indus- trial Average will register lower lower lower low low- er sometime during 1963 and stocks will show an average I yield of or about four percent Either dividends must be increased increased increased in in- creased or prices of stocks stocks' must go o lower Both cannot continue forever so poorly ad ad- The ab above ve comment refers primarily to industrial stocks I J forecast that both the gross and net earnings of or utility stocks wil wilT advance during 1963 and for some years there there- after atler The utility cumulative n have reached a will closely closey close- close point joint whereby they ly y follow interest rates as determined de tie by the Federal Reserve Reserve Re Re- serve Banks Banks- The Thi utility com com- common mon non stocks should shoud slowly rise risen in n price provided the they arc are not unjustly limited by legislation or by state slate and federal regulatory regu- regu atory commissions As for the railroad stocks I generally feel bearish A war with Cu Cut or a world nuclear war breaking out anywhere could caus caul the stocks of or all allour allour allour our transcontinental railroads to go u ur sharply in price but down they would come again We arc are today in an electronic age and no longer in a railroad rail road age Those who desire to invest in common stocks should stick slick to the oils chemicals chemicals chem- chem cals and electronics Even then Jien keep in mind Newtons Newton's Law of Action and Reaction which will always determine the time to buy and sell common com com- common mon stocks Regarding bonds I am not pessimistic for 1963 Certainly Certain- Certain ly h y the thc taxable non bonds will sell higher during 1963 Also good term short-term corporation and government bonds will be safest to hold term Long-term corporation corporation cor cor- and e n t bonds may sell for less sometime some some- time ime during 1963 Long term bond prices vary with interest rates rales and the probability of or in in- BUILDING AND ANDREAL ANDREAL ANDREAL REAL ESTATE There ma may be some decline in residential building in 1963 and shopping centers in many suburban developments ma may remain at a standstill for a while However so much money monc money mon mon- c ey is piling up in savings banks which must be he invested it seems that by 1964 many more new homes will be built In this connection when purchasing purchasing purchasing pur pur- chasing a house or business I property be bc sure to stud study the theland theland theland land which usually improves in price while the value of or the building declines When constructing n new e w frame houses build cither either single homes or houses with only two apartments on the I ground flo floor r. r There will be considerable new building of brick apartment hou s e s which should keep filled so long as the they are arc well main main- tamed Old apartments and old houses will decline in price during 1963 The less attractive outlook for home building generally generall does docs not apply to government or public buildings or to all commercial buildings T The Thereal Thereal h e ereal real estate developers however however however how how- ever must spend more on advertising advertising advertising ad ad- in 1963 to meet the growing competition RETAIL TRADE Naturally there will be a seasonal letdown n in retail trade after Christmas Christinas and the markdowns which follow Jan 1 That will be be the time to look for bargains Scan the advertisements advertisements advertisements ad ad- well ell This especially especially especially applies to merchandise that depends more or less on I style such as dresses coats hats and shoes Buy good- good quality items that can be he passed down to the younger children Over all I expect 1963 to see a somewhat higher high high- er level of or retail trade than has prevailed in 1962 Purchases made at real markdowns could be good cause for opening a new charge account But be very careful to build up a name for good credit You can arrange i ito to pay some in 30 days das some in 60 days and some at 90 days but be sure to pa pay a little little little lit lit- tle before your our account is due Good credit at a good retail store will help you ou and your husband or wife when you youma ma may need this credit later to bu buy real estate or start a business business business bus bus- iness of your own CUBAN CU AN OUTLOOK I forecast that the Cuban problem will not be settled in 1963 It nay may extend until after the 1964 1961 presidential elections The Russians have removed their missile installations and bombers from Cuba in accordance accordance accordance ac ac- ac- ac with President Kennedy's Kennedys Kennedys Kennedy's Kennedys Kennedy's Ken Ken- nedy's demands In return Mr Khrushchev will undoubtedly undoubtedly edly want some concession in Berlin or in Turkey which now bottles up Russia in m the winter due to Turkeys Turkey's control control control con con- of or the the- Dardanelles Khrushchev must placate his people at home b by improving improving improving I ing rather than reducing their standard of living I saw this I vcr very clearly when I was in Moscow He helped Castro only only only on on- ly so that he would have something something something some some- thing to trade with the United States either cither in connection with Berlin or with our bases which we now have in Europe Khrushchev expected to later withdraw from Crom Cuba when he first decided to help Castro He knew Russia could continue continue continue con con- to use Cuba as a base for Russian submarines Now both Khrushchev and Castro are arc looking to save face at home Some think the Cuban fracas w will ll make President Kennedy much tougher with labor here herein in the United States but I disagree Labor lead leaders rs may maybe maybe maybe be more reasonable in their demands but they will continue continue continue con con- to have friends at the White House LA LABOR OR AND ANI THE filE PROFIT MARGIN MAnGIN f Readers should realize that I the steel workers can reopen i 1 their wage contract after May r 1 1963 The settlement of or this contract w will ll be very likel likely to influence other labor disputes disputes disputes dis dis- depending largely on international conditions I feel that our country is becoming becoming becoming be be- coming immune to crises believing that the cold war will continue for years to come There however will be beno beno beno no nuclear war within our generation gen gen- Cl and no international war of any kind in 1963 Labor should begin to realize realize rea rea- lize in 1963 that wages finall finally depend upon the employers employer's margin of profit The year 1962 has seen many employers close down because of their slight margin Small businessmen business business- men both manufacturers and retailers must have a larger margin of profit proUt in order order order or or- der to exist There arc are too many mergers into bigger units and too many failures of worthy employers Labor leaders leaders leaders lead lead- ers arc are largely responsible for this unfortunate development and are slowly pricing themselves themselves themselves them them- selves out of business Sooner or later this can result in much unemployment ment A tax cut will not solve this ty COMMODITY PRICES s three sixty three will see sec seeman man many basic commodities sell for lower prices Despite domestic domestic do do- production cutbacks for lor man many raw materials world supplies will continue their up up- trend These surpluses in world markets will place additional additional additional addi addi- downward pressure on commodity prices in the US U.S. I There will be exceptions in hybrid corn Idaho seed potatoes potatoes potatoes pota pota- toes and other selected crops Much depends upon the weather er and the ability to hold over surpluses Prices of or peaches apples citrus and other fruits depend principally upon the weather Improvements in cann cairn i n g freezing and storage have been greatly advanced cd while the thc big supermarkets have been beneficial in stabilizing prices The hope of or the fruit Cruit growers rests in cooperative advertisements in newspapers and other media Certain basic chemicals will wil surely decline in price due to overproduction and competition tion ion from imports The US U.S. Justice Department claims to tobe tobe tobe be working for consumers in its fights with many companies companies compa compa- nies such as the dairy concerns concerns concerns con con- cerns but in the end supply and demand will determine the result and not legislation or court decisions TAXES AND INFLATION Before the Kennedy Administration Administration Admin Admin- retires I forecast that we will have either more taxes or more inflation Ne Neither Neith Neith- th- th cr er however howe need come conic in 1963 The stock market ma may discount the expected inflation by temporarily continue n g above on the Jones Dow-Jones Industrial Average The November November November No No- vember elections indicate that the he voters want a welfare state slate and I believe this means more more inflation rather than more taxes The Thc old saying We cannot have lave our cake and eat it too is s certainly true today The elections referred to above indicate indicate indicate in in- that the thc majority of voters voters voters vot vot- ers really believe the they can have lave all these temporal benefits benefits bene- bene fits ils such as medical care for forthe forthe forthe the aged medical and hospital hospi- hospi tal lal payments more social security security security se se- se- se etc without having to pay the b bill ll either cither through increased increased in increased in- in creased taxes or through lion tion ion With all that is promised to young people in the form of or free Tree education college scholarships scholarships scholarships schol schol- etc in addition to the thc mentioned above-mentioned help this means that the employed people people peo peo- plc from ages 25 to 65 Bj must carry the entire burden Some Sonic Sometime time lime they will rebel but it will not be in 1963 although it might come at the next presidential presidential presidential election Certainly the enactment of a real ureal in all tax cut is no sure thing It may look good to the investors investors investors in in- working man but not to or employers HE liE UNITED STATES DOLLAR AND GOLD The purchasing power of our dollar will gradually be less but this statement applies also alsoto alsoto alsoto to the currency of 01 all coun coun- tries If our dollar declines in value it will be the same for every nation If U we devalue the dollar or temporarily look prosperous b by phony bookkeeping bookkeeping bookkeeping book book- keeping the other nations will gradually follow CoHo suit and we wc will all wind up where we started The dollar will not be devalued devalued devalued de de- de- de valued in 1963 although the Wall Street and md Lombard Street brokers will put out propaganda to the contrary Now a final word with regard regard regard re re- re- re gard to gold The United States will continue to lose gold on balance during 1963 The only way to prevent it in 1963 is for us to export more goods and import less This would require certain sacrifice sacrifice sacrifice fice on the thc part of our people Since my trip to Africa I have concluded that the an an- answer answer answer is in producing more gold rather than leaving it underground un un- un- un If H gold had a free market its production would increase naturally and i 11 it t would then represent one of the safest and most profitable investments available today Another one ma may be uranium oxide e. e Of course large quantities of gold may be found on the which surface of the moon brings me to my final subject subject sub sub- which I hope readers will take lake seriously GOING TO TilE THE MOON Nobody will reach the moon in 1963 or in 1964 but you will see more and more about it inthe inthe in inthe the newspapers during 1964 or 1965 Do not think that the United States Stales will be the only countr country preparing for this trip Russia England France Francc Germany and possibly China arc are preparing today to go to the moon With labor getting gelling 15 cents for a hour 12 day in China an and with booster engines engines engines en en- gines purchasable abro a d China may be the Ole first to get to the moon China docs does not need to be a member of the United Nations in order to send a rocket am and three men to the moon am and return Chinas China's trip to the moon may be financed by foreign for for- eign capital China will win the territory it wants in India and ull ultimately matel get Burma I Buying of or going to the moon stocks may become a avery avery very active speculation The original boosters will be paid for b by some government but bu their operation will be left fo for profit The situation may compare compare compare com com- pare with our great gold goh rush in 1849 1819 However it wilnot will wil I not b bl b limited to gold but WIll wil also include diamonds platinum platinum platinum num and perhaps other elc ele- elements clements ments which arc are not yet ii in our chemistry books My I great-grandparents great were all seafaring men taking people people peo peo- pie from New England down dow the East Coast of or South America America America Amer Amer- ica around the Horn and u uthe up the Pacific Coast a trip o of two months The astronauts astronaut say that they can make th the trip to the moon easily in less les than four days One final fina I Ad-I thought If t the e Kennedy n edY Ad Administration Administration Ad- Ad ministration gets into too much of bf a jam between taxes and inflation the promotion of trips to t the e moon may pull pul them out of or their troubles By enticing private capital which is now in need of some attractive attractive