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Show THE COAL SITUATION. Commodity Not Securities-A Securities-A Buy Says Babson Wellesley Hills, .Mass. Oct.. 19, 1923. There seems to be plenty of coal according to a statement issued today by Eoger W. Babson, the statistician, statisti-cian, who has just completed a survey of the coal situation. "A year ago, this country was emerging from the chaos of the great bituminous coal strike of 1922," says Mr. Babson. Bab-son. "The output for practically prac-tically five months, April thru August, was held on a minimum mini-mum level. As a result, the total production of bituminous coal last year was the smallest in twelve years. Xot only were stocks of coal low, but transportation trans-portation facilities were unable to meet the urgent demand from manufacturing interests. It was difficult to obtain prompt and adequate deliveries. deliver-ies. Consequently, prices of coal soared and remained high during the fall and early winter win-ter period. "The average price of soft coal in October, 1922 was $4.40 per ton at the mine a level 266 percent over the pre-war average. aver-age. Today, we find contrary conditions. A strike this year was avoided ' and production uu praciieany a record basis. During the first 230 working days of this year, (the output has exceeded " 413,435. 000 tons, against 271,015,000 tons during the same period last year. In fact, we have produced more coal to date than was brought to the surface during the entire 12 months of 1922, the exact figure for last year being 407,S94,000 tons. Incidently, the output this year has been exceeded only once in the history of this country; coun-try; that was in 191S, when 579,3S5,000 tons were produced. pro-duced. It is not surprising in view of current figures that commercial stocks of bituminous bitumin-ous coal have jumped. Statistics Statis-tics show that on September 1, stocks were estimated at 56,000,000 tons, or the highest volume since April, 1922. Present stocks represent an increase in-crease of 35 percent over the low last March and 300 per cent over a year ago. "The effect of excessive soft coal production, large and increasing in-creasing stocks, diminishing, industrial demand and relatively rela-tively favorable railroad conditions con-ditions has been pulling the price level down month after month. With little interruption, interrup-tion, prices have continued downward since August, 1922. Today, the price at the mines is approximately $2.40 per ton, or 100 per cent over pre-war levels, compared with 266 per cent a year ago. Economically, Economical-ly, there cannot be a further market price decline. In fact, conditions point toward a firm price level over the fall and winter months. We are now entering the period of maximum maxi-mum consumption and the ens tomaiy seasonal strain in our railroads. Stock protection over the fall and early winter period should not lie postponed. "So far as the securities of coal companies are concerned, there is no occasion for anyoni' to become optimistic. To be sure, in the list of stocks and bond- f companies representative representa-tive of the soft coal industry, there is wide vwiVrV The btocks of the older and better- known companies are, by nj means, low in price. In view of the general trend in the speculative spec-ulative markets, there is no incentive in-centive for purchasing. For the long pull, stockholders must bear the brunt of the struggle which the industry faces, aganist the pressure of rising costs thru union demands de-mands on the one hand, and a condition of over-production combined with increasing favor for oil as fuel to limit the selling sell-ing price on the other. "Bonds issued by a coal mining min-ing company can hardly be said to have the qualifications commending com-mending them to conservative investors. In the first place, the mining industry represents a liquidating proposition, that is, each ton of coal taken out, reduces the assets ultimately available. Serial maturities, or a sinking fund charge, have been adopted in some cases to meet this objection. But such a fixed charge entails a serious depletion of working capital in times of full operation and J makes the cost of coal mined practically prohibitive in times of severe competition. In any event, it must be obvious even ion casual reflection that, after a period of years of large demand de-mand and good prices for coal such as we have had, any new borrowing either to expand mining operations or carry a large inventory, does not evidence evi-dence conservatism. "Under the present outlook ifor business the Babsonehart shows it this week at 10 percent below normal. I would rather have the bond of the power company or railroad which uses the coal than to cast my lot with the fortunes of the coal mining industry." |