|»AGETW6 —— —_ ^ ^ —
BABSON SEES PROSPERITYiNJ^^
^ ^ - ^ , 1 possibilities of still higher earnings
the franklin press and the highlands maconjan
THURSDAY, DEC. 31, 1936
BUILDING BOOH
IS PpiCTED
Easier Credit but Higher
Prices Forecast for
New Year
(Continued from Page One)
first entire twelve month period
since 1929! Unless—
Lator Holds Whip-Hand
Tt is seldom that there is no un
less.” 1936 was an exception. Then
there was no “but” to my bullish
ness. Today, however, there is one
major question in my mind tbe
labor problem. If this issue is not
handled properly, business could re
ceive a very rude set-back. Workers
are in the most strategic position
today they have ever held.
Labor leaders can tie prosperity
in a knot if they call a general
walk-out or they can give prosper
ity a boost if they keep their heads
Do not misunderstand me. I am
not predicting grave national labor
tie-ups, even though some current
situation do look threatening and
even t'hough there will be a big in-
creas'e in the number of strikes. I
merely say that if labor leaders
try to push too far and too fast in
their demands for higher pay and
shorter hours,, we are in for ser
ious trouble.
Four New Factors
There are four new factors in
the picture today which give labor
such a strong hold on industry.
First, is the tremendous gain in
industrial production and profits.
Second, is the steady rise in living
costs. Third, is the big gain m
labor’s influence cis indicated by
the election results. Finally, there
is the “powder-keg” row between
the Lewis and Green factions. These
factors, particularly the latter, all
increase the tension of the situa
tion.
The real key to- this puzzle is
the Administration and its policy
toward labor. If trouble should de
velop, Mr. Roosevelt with his al
most unanimous backing could
swing the tide of battle in which
ever direction he wished. Because
of the President’s unprecedented
worker-following, the outlook for
labor troubles depends to a large
extent on Washington.
Conglfess Not Harmful
In fact, much depends on Wash
ington as far as most problems are
concerned. Not so many years ago
it was the vogue to take careful
soundings in Wall Street before
making an annual forecast. Today
tbe most important preparation for
my outlook letter is to drop the
head-line in the Potomac. A fort
night before Christmas, I visited
the Capital. Experienced observers
there believe that the President
may have more trouble than the
public imagines in holdirjg his huge
Democratic majority together.
The Washington consensus is that
Congress will not be harmful to
business in spite of the voters
roar of approval of the New Deal.
There will be a lot of barking but
little biting. The emphasis of the
coming session will be on perfect
ing legislation already passed .and
adding , a few amendments thereto.
I doubt if a hamperf.ul of new re
form laws will be jammed through.
Bond inflation to Continue
It will be two years before an
other election, and the .average
Congressman will be worrying less
about his constituents and more
about the Constitution. Along this
line, I expect to see a big improve
ment in federal finances. An effort
will be made to cut expenses. Re
lief aid will be continued ibut not
on the boondoggling scale of the
past three years. The government’s
income should rise steadily as 1937
works .along. But despite Washing
ton forecasts to the contrary, I
doubt if the gain in revenue or
the sla.s'h in expenditures will be
sufficient to bring the budget into
balance by June 30, 1938.
This means that inflation will
gain ground this year. ,It has al
ready taken big strides in recent
years although the general public
is entirely unaware of it. Public
debt has grow.n $16,000,000,000 since
July 1, 1930. Tax receipts have
doubled since 1933. Still the Treas
ury is forced to raise funds to
p,ay the public bills by selling gov
Your 1937 Business Policy
The successful business man, merchant, banker,
worker, investor, or householder is the one who
adjusts his attitude to meet changed conditions.
When conditions are uncertain, as they have
been in recent years, cautiousness is the correct
policy. Today, however, the road is ckar ahead
This is the time for action. Avoid being ^aug
by rising prices and business
by falling prices and business m 1929. The de
pression is over. Stop thinking about it. Get the
new prosperity viewpoint if you want to be suc
cessful in 1937!
ernment bonds. This money finds
its way into the banks in the
form of jobholders’ or contractors’
deposits. The bank then “invests”
these deposits by buying more gov
ernment bonds. _
The cycle repeats itself over ana
over again, building up bank de
posits and ballooning the public
debt. This is camouflaged inflation.
It will continue in 1937 aided by
another form of inflation — the
check or credit type, similar to
that which we had in 1929. When
all is said and done, every one of
the various inflations has the same
gffgct—the boosting of prices and
the speeding up of business and
building activity.
Sees Home Building Boom
Four years ago the building of
a new home or factory was a re
latively rare sight. Only eight
homes were.built at the depression
low in 1933 where a hundred were
built in 1929 and where fifty are
being built today. Home^ building is
a typical capital goods industry. It
is a direct thermometer of public
confidence. Once confidence returns
there is a veritable stampede to
take advantage of real estate bar
gains and to get under the wire on
building costs. A feature of 193/
should be a real boom m home
building. . ,
Non-residential construction, aside
from public works, should also en
joy a big gain. Plant expansion or
modernization is a necessity for
many concerns. Prices of building
materials are on the verge of a
sharp mark-up. Demand for skilled
building mechanics will soon be re
flected in 'higher bids on jobs.
Bargains in existing structures are
pretty well picked over. If you
must modernize., renovate, repair,
or build, let out your contracts
NOW!
Extend Leases Niow
The same applies to rents. If
you have favoraljle lease extend it
NOW for a five-year period. After
a 10 per cent advance last year,
rents will probably increase an
'Other 5 per cent in 1937—maybe
more in well-located areas. With
the optimistic prospects for build
ing and rents, I look forward to
a profitable year for real estate
men with rising values and with
activity at least 20 per cent above
1936. ,
The outlook for real estate and
building is typical of the outlook
for all capital goods industries such
as locomotives, ships, power sta,-
tions, and machinery. These busi
nesses are due for a much sharper
percentage improvement than the
consumer goods industries. Em
ployment in the heavy group a
year ago was 75 per cent of nor
mal; today it is 85 per cent; and
by next Christmas it should be 95
per cent.
^Vhere fco Get Jio^bs
The 3,000,000 heavy industry work
ers who are still jobless should
dwindle to 2,000,000 by the end of
1937. This would leave only 6,000,-
000 out of jobs next December and
of this number 4,000,000 are the
floating jobless or are unemploy
able. By far the best bet for new
jobs will be in these industries.
My advice to yo,ung men looking
for a job today is to learn a build
ing or machinery trade or to join
the sales force of a building ma
terials or m-achinery- concern!
Skilled workers are going to de
mand, and get, higher pay in 1937.
While total employment should in
crease perhaps 5 to 8 per cent,
wage rates should be stepped up
by at least that amount or more on
the average. Payrolls totals should
show a rise of not le^s than 10
per cent. But remember fatter pay
rolls mean heavier producing cos s.
The latter in turn means either a
mark-up of selling prices or a cut
ting of profit margins-
Sees Rising Prices
Three years ago higher costs
would b-ave meant slimmer
This year they will mean highe
selling prices. This holiday season
we are waving' good-bye to a buy
ers’ and employers’ market. For the
first time since 1929, we shall see
prices during 1937 controlled by the
Lller and wages by the employe^
Gone, temporarily at least, are
the days when orders were taken
below cost simply to keep the ma
chinery from getting rusty. Gone
are the days when people would
work for nothing simply to keep
up their courage. In addition to
higher producing costs the Kobin-
son-Patman Price Act, if strictly
interpreted, will push distribution
costs higher. All this will be im"'
rored on wholesale and retail
voices. j
Sharp Mark-Ups Ahead
Wholesale quotations on 784 pro
ducts—from raw material to fin
ished goods^have risen 3 per cen
in the last three months and are
at a new top since September, 1930.
Next Christmas this price average
will be 5 per cent—m-aybe 10 per
cent—higher than it is today.
Four years ago wheat was seu-
ing at the lowest price in three
and a half centuries—41 cents a
bushel. Because it was cheaper
than to pay freight, corn was be
ing burned for fuel in place of coal.
Milk was being poured on the
streets to reduce over-supplies oi
1 butter and cheese. There was a
bounty on baby pigs.
Today wheat is around ?1.3b per
bushel. Corn is being imported
from Argentina. Much bulk butter
sold in United States’ markets
comes from abroad. Bacon is a
delicacy once again. This all goes
to show how much more powerful
are the rules of nature and «o-
nomics than the laws of men. The
drought, the AAA and short sup
plies, -plus better business and
heavier consumption, have doubled
farm prices during the last four
years. Now, what about the out
look for farm prices this y-ear?
Anotiher Good Year on Fadrttis
Grain and cotton prices depend
on the weather and plantings. Bas
ed on current acreage estimates
and barring drought, prices of these
products should not be much high
er next December than they are
today. Meat prices will edge up
ward for our livestock population
is near the lowest point in years.
Dairy, egg, and poultry prices will
advance under the impetus of high
er producing costs during; the first
.half. Good prices plus higher pro-
’ duction should lift farm income be
tween 5 to 10 per cent during the
new year.
Farm profits will be somewhat
less due to mark-ups in the prices
of products which the farmer has
to buy. With farming continually
more profitable, good land (now up
20 per cent over the depression
low) will continue its gradual rise.
This recovery in agricultural prices
is a very bullish factor in the busi
ness outlook but do not forget that
it means higher living costs in the
city.
ClotMng to Cost More
Up to .now, the cost of living has
not been keeping pace with the
recovery in general business. Its
advance totals only 20 per cent
■against 75 per cent for industrial
activity and 30 per cent for retail
prices. This coming year the gap
will narrow. I look for a 5 to 8
per cent rise in living costs, against
only a 3 per cent gain in 1936.
In the vanguard will be clothing
. o I possibilities of still higher earnings
price-tags. They have been at ;
standstill for the last three ye _ stocks added attraction to.
,„;i1 mnvp ahead » to protection against
a rising cost of living.
In spite of the 30 per cent gain'
in stock prices during the last
twelve months, I believe that many
stocks are not over-valued. There
may be periods of backing and fill-
ij-^g^ ]^ut the basic trend is still up
ward. The bull market which be
gan on July 8, 1932 has not reach
ed its peak.
Goo'tl Selection Vital
While the general pattern of the
stock market should be upward,
prices of individual groups will vary
greatly. Good selection will pay
even greater premiums this year
than last. Biggest gains percentage
wise will be shown by the heavy
industries. ^Machinery, rail equip
ment, building material, electrical
equipment, steels, metals-, and of
fice supplies will be in the van
guard.
No War In 1937
No one can deny that the over
seas situation is critical. Europe
and Asia today closely resemble
but they will move ahead 8 to
ner cent in 1937. Food bills will be
S to 8 'per cent higher. Mont y
electric and gas statements will be
slightly lower. Coal and co-ke will
ease off as the peak of the heating
season passes, but those wh°
oil should make contracts now as
protection against a 10 per ce
advance.
1937 Salesmian’s Paradise ^
Merchants can honestly plug ic
■‘Buy Now-Higher Prices Coming_
aopeal in their advertising. Sales ^
managers can safely jack up thcni
’”?es®,»Cas a,Kl P;
p„p,.a.ion. by at 0
rpnt—nrobably 2U per ceiiu
Lies feature of 1937 will be the
return of the seller’s market for
the first time since 1929.
Lery hour of effort and every
dollar of expense put into se
work in 1937 will return what two
Td in 1934 and what two may m
19391 I urge every salcsmanager
and every salesman to work his
Lad off in 1937. Get your reward
for all the hard work of the pas
SuTnvTellin" days will the -armed camps of 1912-14. A
few years. Sunny a general war involving Fascism vs
not last forever!
Best Sales Ahead
Results will ™ of course, in
different sections. Back m 193 y
sales map showed only one go ,
excellent state and thirty blue,
poor states. Today this same map
shows twenty gold states and only
two blue states. During the past
two years, agricultural sections
have been the s-alesmanager s best
bet Although farmers should con
tinue to be good customers, the in
dustrial centers, particu arly m the
Northeast, Middle Atlantic, anc
Middle Western areas will again
come to the fore.
Remember, however, that tne
Southeast, Southwest, Pacific and
Mountain areas are our fastest
growing markets. The great op
portunities for future growth and
expansion are there! Keep this
fact in mind when you are mak
ing up your sales quotas or when
you are investing in stocks and
bonds.
Bo’nds lat Ceiling
Bond prices are the most amaz
ing factor in the security markets
today. They are selling at the high
est prices in history. Since June,
1932, the yield of the average bond
has’dropped from 7]/2 per cent to
4^ per cent. The 1937 outlook for
b6nds depends almost entirely on
the course of money rates. My
forecast is that the latter will con
tinue at current levels until the
government refunds all its short
term debts into long-term issues
at aibout 21/2 per cent. After that
rates will depend more upon the
commodity prices and general busi
ness.
Hence, I feel that present high
bond prices cannot continue indefi
nitely. Those buying bonds during
the coming twelve months must ex
ercise extraordinary care and judg
ment to avoid getting burned! With
higher money rates a certainty
sooner or later, I feel that the gen
eral bond market is today where
the stock market was in 1928.
Bull Market Not Over
The outlook for money rates is a
big influence also on stock prices.
Pitiful returns on savings banks
deposits, bonds, mortgages, and
high-grade preferred will not coax
money out of good sound stocks.
The tremendous volume of money
seeking investment (a billion dol
lars in December alone) will pre
vent too big a stock sell-off. 1936
dividend increases and extras, plus
general war involving Fascism vs
Communism is inevitable; but a
general European War will not
come in 1937. There will continue
to be revolutions within nations;
but no formal conflict between
natio.ns. ;
European, securities will remain 1
unattractive although world trade
will continue to increase slowly.
The gain, since 1933, now totals 30
per cent. South America, France,
Holland, Switzerland, Belgium,
Scandi.navia,. Canada, and other
British Commonwealths will be our
best markets. Japan and England
will not be as good as in recent
years. Spain, Germany, and Italy
will be our poorest.
Currency Outlook
The most hopeful foreign develop
ment of 1936 was the “Gold Bfoc”
devaluation and three-cornered cur
rency agreement between France,
England, and ourselves. I do not
expect, however, that the dream of
international stabilization can be
come a reality during 1937. Im
provement in business conditions in ,
Europe is the best remedy for'
most of its troubles.
Dictators, isms, war eagles, and.
the like thrive on human suffering:
and misery. That is why I have al
ways preached that one nation can
prosper only as the entire world
prospers. If we could only get
Europe back to normal we would
solve the last remaining basic prob
lem confronting -happiness in the
Americas.
Conclusion
As 1937 opens, most of the snarls
brought on by the__ depression have
been untangled. Improvement is
widespread through all branches ot
industry. Employment is gradually
approaching normal once again:
The outfook for the cofing twelve
months is bright. I predict that as
we look back at this New Veai
season we will remember it as 2
momentous milestone in our busu
ness history.
Whether we realize it or not to
day we are now placing a head
stone over the' 1929-193,6 depressioi
corpse and bundling up the ‘
prosperity baby in swaddhni
clothes. How long this period o
prosperity will last or how f^ ’
will go, no one can .now say. Iha
depends upon how well we hav
learned that lasting prosperity on
comes
through the practice of m
dustry, honesty, thrift, faith, an
other basic virtues !
Take a Tip from Roger Babson, and
BUILD NOW!
Mr. Babson says: “A feature of 1937 should be a real
in home building. * * * * Prices of building materials are ^
the verge of a sharp mark-up. * * * * .If you must modernize,
renovate, repair, or build, let out your contracts now.
Wise people will heed Mr. Babson s advice. Prices are a
vancing almost daily. Build before they go still hig’her.
We will be glad to furnish free estimates on materials. We
carry a large stock of building materials on hand and pro -
V ably can meet your needs without the delay which usually a -
companies special orders.
Franklin Hardware Co,
A. R. HIGDON, Manager FRANKLIN, N. C.