OCR Text |
Show RISS AND SECURITIES IN 1923, BY BABSM I PRICES, WAGES AND SALES FOR COMING YEAR DISCUSSED; j ISTOCKS AND BONDS ARE EXPECTED TO AVERAGE HIGHER 1 4 I I tttt) ' 190S 1890 1695 1900 jBCSt I 1 11 111 1 ' 1 U 'J 1 I LONG SWING BOND CYCLE j 1 I uf V Present Bono Market - I ljjgLgg - . ... . ;ca4ssejj I WELLESLEY HILLS. Mass.. Dec. 30. "What's going to happen in 1923?" That question is uppermost In the minds of l.OOO.nuu American business men and In v (tors wlio are facing the problem of making plans for the new year. Slgn3 are not clear antl the usual barometers seem to contradict one another. In the face of this general confusion con-fusion we had best fall back on the factj and figures. After a thorough study of tho fundamental conditions that govern our market. Roger W. Babson today Issued a statement which clears the air and furnishes a basis of facts for your plans. "We are now at a point in the business busi-ness cycle," says Mr Babson. "whore you can get almost as man; different opinions as there arc business men. I Some are very, bullish for tho coming year, and others cannot seo much hope for business. The reason for such a situation Is that wo are at i present neither at tho top of a boom nor at tho depth of a depression. If we were at either of these extremes there would bo no question of what the next move would he. Aa It Is, we are about half way between them. FAST GROWTH RECALLED. "During the past year l'nlted States business has steadily advanced until , the average for the whole country Is what we usually call normal" business. busi-ness. Having advanced thus far. shall wo Immediately continue Into a great prosperity period or r.ball we go into another period or asprossion ana poor business as some predict? "If you will only remember the fl.oi years preceding 1021 and recall what an enormous orgy of extension exist-( ed, you can see for yourself that It will take some time to get a proper foundation for really good business. We danced during those years, and BOW we must 'pay the fiddler his complete bill Business has really j been like a convalescing patient. Everything will go well with the patient pa-tient If he does not try to get out I of bed too soon. If he tries to overdo he will have a relapse. Wo now havo ! passed the most painful part of the! readjustment. The crisis Is over, hut I a process of cost reduction and rebalancing re-balancing Is necessary." PRICE SPREAD IS WIDE. "Today a wide disparity exists between be-tween prlcea of different commodities, ; and particularly the spread between i producers' and consumers' goods. This jis a brake on trade, one-half of the i . people cannot earn enough to buy j ; the goods that tho other half has to I soil. There are one hundred and 3lx ! million people In tho United Stntes and 60 per cent of them get their living from producing or distributing raw materials It has thus fur been impossible to reduce the prices of fin-i.nhed fin-i.nhed consumers' good to meet the cutj ' on these raw materials. The purchasing purchas-ing power of these people la out of Its natural proportion. ' It Is not entirely a matter of reducing re-ducing wages, although labor costs aro a large factor, nor la It entirely a matter of Inefficient management. 1 No. the problem of high costs is not ;a problem of any one element; and ' readjustment can como In only one way drastic competition. All this will take further time. "Does this mean that there will be no opportunities in 1923 ? Not a bit; Tluro will bo Just as many chances i to make money as In any yoar you ever lived. It will be possible for you to make as much during the noxtl2 months as In any yoars of your business busi-ness life, but It will not be along tho lines which made money in 1919 and '1920, nor in any other boom year. The profit In 1923 will come by giving attention to details, by stopping the I llttlo leaks, by saving here and tboro through new labor-saving Inventions, and most of all, by dovlslng new and i moro economical means of dlstrlbu.-i dlstrlbu.-i lng goods. This was not at all the alt- J i uatlon during the business boom. J Then tho man who stopped to prc I Qt I small leaks fount himself taught by tho momentous rlso In prices and changes In general conditions. ( isTS STILL HIGH. "Those days have passed They were wild and merry while they lasted. Now business has come back to earth. In mu.-v iituui.it iva. uu cwnntrv urvauv" lng capacity was created. During the boom, overhead costs were increased to keop up with an abnormal turn-1 over. Today tho amount of buslnes-s has dropped back more nearly lo' normal, but costs have not been pro-1 portlonately reduced. Higher wages, j higher rents, moro expensive sales or-1 ganlzatlon in fact. nearly every ! Item of expense Is out of proportion With the amount of business done. "Instead of wild gyrations In the, commodity murkots. tho uvorage trend throughout the coming year should bo more of a tddowlse. movement. Horn-commodities Horn-commodities are high and others ar-very ar-very low, but tho majority at presn are about 16 per cent above their levels a year ago. A yoar from now WS shall probably find them averaging: averag-ing: nt uhout tho same level they stani today. In between, thero may be a further rally from the low of 1922, and agricultural products certainly should do better." EARNINGS WILL BE H1GHER. "Earnlngs," continued Mr Babson. "should averaKO somewhat better than In the yer Just passed A survey sur-vey of 100 leading Industrial companies, com-panies, recently made by my organla.i- I tlon, showed that In 1919. 96 per cent1 of these companies mado a net profit, while only 4 per cent ehowM a deficit. In 1921. the number of rirms whloh could show a profit was cut down to 4S per cent. Over half, or 52 per cent of these Industrial concerns lo6tj ioney on their year's business. 1922 I has witnessed a change from red in I Igur. 3 Into black Ink figures, hut the I int oi net profits will not tie large when the books are finally balanced. We are just getting back onto the right side of the ledger. "The shortage of labor Is one of tho worst features of the 1923 outlook. out-look. The moment that business works up to average activity lt be-comes be-comes Impossible to get sufflel jnt 1 workers. This raises costs antl in turn' incrsases commodity prlcos and the! rost of living. Tho immigration law! Is largely the cause of thin shortage. This law r.-stricts the number of lm-' migrants in a single year to 3 per contj of tbe total number of respective nationalities na-tionalities already In the l'nlted Stat Before the war we had an addition 1 of a million Immigrants a year Now' we are receiving less than 300.000 ind at least 60 per cent of these are women, children or other dependants. On the other hand, I doubt If the I repeal of this 3 per cent Immigration law Is the proper aolutlon of the present pres-ent lubor shortage LABOR SOLUTION. "The real solution Is not the repeal of the present immigration law but I rather the repeal of the contract labor law for as long a period as the 3 per 1 ent law remains In force. This would j make lt possible for employers to j promise selected foreign workers employment em-ployment before leaving their own I homes. Th. moment that the immigration immi-gration law Is repealed tho contract ! labor law can again be applied. "There should bo no great dlffl-I dlffl-I culty In getting ample supplies of ; bituminous coal this winter. The car I shortage Is diminishing somewhat. i titiv oure I'-n I'liuiiiuiuiis gun n r' being produced. suggesting low., ri prices. The mischief of this situation lies In the fact that it win again U to tho advantage of both minora and i operators to close the mines for aj time Tho difficulties which brought on tho strike last year have not b-en Mettled. Thorc Is serious danger of I another strike In the soft coal f leld'j. ,' POLITICAL WORRIES "Everybody Is worrying about tho; political situation. There is talk of' radical legislation during the coming, year. Mont of this is merely the echo from campaign speeches. It may be a noisy year. Both the conservatives .ind tho radicals hac a eto power, but neither Ss fetrong enough to push through any extreme measures of Its own. The only kind of legislation that will really be enacted is that which will appeal to members of both croups. Already tho federal re -board has Issued a ruling, admitting, a large amount of agricultural paper lor rediscount In the federal resorvo banks. Th.- Muscle Shoals problem Will probablv be settled. elthr by sale to Henry Ford or by development on the. part of the government Itself. The soldier bonu. will probably b enacted; although no agreement as to the terms nr means cf raislr.g tie money has yet been mode. It is Improbable that there will bo any lncteaae In the mount Of business taxes. COPPI R STOCKS CHEAP. "Th" political aspect has frightened many stockholders, but It Is entirely I too early to be worried The think to ( watch Is fundamental conditions. We I aro still In a readjustment period. This means that sooner or later wc I lall work toward bef.er prosperity It Is true that Industrial stocks are much higher than a year ago and i are certainly not the bargains that they were. However, as I have already al-ready stated, certain lines of Industry are just getting redy to go forward Tho Industrial market will be 'spoil;. ' but there are a great many lssu'. s that should do b.ter In the comlog year. "The rail group Is. relatively. n..t so far advanced as the Industrials. 1 do not believe rafls should be bought Indiscriminately, but the rail average will follow up the general market, f nm much more attracted to the long-haul long-haul roads than to tbe shorter lines The motor truck is a feeder for th I former but a competitor of the latter. lat-ter. Copper stocks havo really not started yVt, but the statistical position posi-tion of the motal is far better than it has heeu for a long tim? Coppers, eeralnlv. are selling at bargain levels MONEY RATES EASY. "Mone conditions should continue good There Is no question that tho banks are In a strong position. The federal reserve banks today have r -serves equal to about 76 per cent of I their note and deposit liabilities. The reserve required Is between 35 and 40 I per cent It Is true, that when foreign for-eign countries begin to get on their feot. It will he necessary to send much of this gold back. For the preont , however, this gold represents the basis I (on which a considerable expansion of credit can be built. It guarantees I I us a relatively easy money rate, until i I I heavy gold exports are resumed. Dur- I I ing the comlncr year, borrowers need I have little fear of a lack of funds for all legitimate purpose, and this also annlles to lonir-tcrm monev. that la. L I capital for permanent investment. j Mortgage rates during 123 shou -l ! work lower. Today, the average rats of real estate moi tgages througho'.;1 i tho Cnitod States Is between uwr cent and 7 per cent. The time is not far awaw when this average will stand between 5 pet cent and 6 per cent BONDS WILL ADVANCE. "Of course, the ease of the money market Is distinctly favorable to Jon.' time bonds. There Is a point In tb -business -yel when Industry become uo active that moruv Is absorbed by irate,. Whin this occurs bonds aro sold and develop a downward tendency. ten-dency. This point In the cycle has not yet appeared. Moreover, history shows that following the civil war bond prices, barring temporary fluctuation, roso for a long period of years, the 1 advance culminating about 1900. From th Ispolnt. a descent was gradual' v mode to a low point at the end of the European war. Since this low point, hby is repeating Itself, bonds jjnvlng n m 1 a middle ground, but .till far below tho 3.30 or 4 per cent basic of tho 1900 period All these actors sug. est that well select- 1 bonds, i.otb municipal and corpora-lion, corpora-lion, are a distinct purchase. "Bonds and money,' concluded Mr. Babson. "are certainly sound factors in the situation. As for business as a whole, tli.-ro Is no doubt that it will average better this comlDg year than It did In 1D22. This does not mean that there will be any boom, but tha". there will be plenty of money making opportunities for those who know fjndamcntal conditions." General business, according to the Index of the B ibsonchart. standi at only 2 per cent below normal. ths same as a week ago. |