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The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, December 31, 1937, Image 2

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Rural Outlook Is
Fair, Declares
Noted Economist
Sees National Income Slightly Under 1937,
Waning of Labor's Power, Lower Retail
Prices, Stock Revival, Inflation
Babson Park, Massachusetts, Dec. 31, 1937.—We are not
entering a major depression 1938 will see a resumption of the
upward trend which began in 1933. The first quarter may be
poor—much worse than the early months of 1937 but later
in the year I look for a substantial revival. Do not confuse
this current sharp recession with a major depression! Pay
rolls, prices, stocks, real estate, and jobs should all be on their
way to new highs by the end of 1938.
This December presents a tremendous contrast with a year ago. Then,
the old year was riding into the history books on a great wave of optimism
and hope. "Good times" lay over the horizon of 1937. The dark years of
1939-1935 were drowned out in a hurricane of wage boosts, dividend extras,
and gigantic Christmas trade. My forecast at that time was: "1937 will
be the first year of real prosperity since 1929 The entire year's gain
should average seven to eight per cent above 1936,
Business did
Prosperity did come.
average 7 per cent above 1936. This
put August the Basonchart stood at
8 per cent above normal, higher than
It had been for seven years. But af
ter Labor Day the squall, which had
been brewing all year, suddenly struck.
High taxes, political muddling, labor
agitation, and thin stock markets cre
ated a tornado of distrust and fear.
The result has been one of the sharp
est business declines on record. The
Babsonchart is now 19 per cent below
The current gloom will continue to
hurt business during the early months
of 1938. But while activity will aver
age at least 15 per cent below the first
quarter of 1937, it should not fall much
below current levels. During this dis
couraging period the base for a re­
y//// y/
/A r.-, -7
This to our wish
(or friends and
oustomers and
those we haveyat
to haw the pleas
ure of serving.
sumption of the upward trend will be
laid. The spring rally In 1938 will be
much stronger than seasonal.
Good 1938 Trend
By next Fourth of July, business
should have recovered from a third to
a half of its late 1937 loss. The re
vival will pick up momentum during
the second half. How far it will go, it
is, of course, impossible to say now.
Nevertheless, as a long shot, It would
not surprise me if the 1937 peaks were
equalled before next Christmas.
Because of the poor first quarter of
the new year, the average of general
business for 1938, however, will be
slightly under roughly 10 per cent
below—the average for 1937. The im
portant point next year is the trend.
A poor start (but not much lower than
"We Thank You"
All Phones til 118 Third Street
Thatf ou may
make the most of
it is our slnoere
wish for the year
just beginning.
from your friends at
Montana- Dakota Utilities Co.
Babson Predicts Business Will
current levels), an improving second
quarter, and then a sharp upward
surge during the final four of five
months is my idea of the 1938 business
Business Needs Velief
In making these estimates I am
counting on co-operation from Wash
ington. A year ago my optimism for
1937 was tempered by the labor issue.
I said: "If this issue (labor) Is not
handled properly, business could re
ceive a very rude setback." Now I am
tempering my 1938 optimism by saying
that congress must co-operate with
business or this present slump coiild
continue for some time.
Many of our current troubles come
from fear and distrust. They are
largely psychological. Congress today
must treat business as a doctor should
treat a neurotic patient. Scolding,
harsh diets, enemas, and the like are
"out." A few sugar-coated pills In the
garb of kind words and a complete
rest from new laws is the prescription
which congress must write for busi
Congress Will Help
I am confident, too, that Doctor
Congress will help his patient. No one
is quite so shrewd an appraiser of
public sentiment as the average con
gressman. When he has his "ears to
the ground." he is as keen as a robin
hopping about a lawn listening for
worms. The solons were home for sev
eral months this fall, getting their
constituents' reaction to "reform
legislation. So with every congress
man and every third senator for re
election this coming autumn, I believe
that business will be given the psycho
logical relief that it needs from Cap
itol Hill.
The biggest aids could be tax re
vision and a utility "armistice." The
undistributed profits tax will be
thrown out in everything except name.
New tax measures will be passed,
easing up on capital gains levies and
perhaps cutting down on the high in
come bracket. A lot of talk will be
heard about a general sales tax, but it
will not be passed. Extending the in
come tax into lower brackets will be
proposed, but killed.
Spending to Continue
I look for a truce between the gov
ernment and the utilities. More farm
control legislation will be passed, con
tinuing the huge federal farm outlays.
Wage and hour legislation my go on
the statute books, but in a milder form
than originally proposed. The presi
dent will get only crumbs from his
government reorganization proposal.
Generally speaking, the marital status
of Mr. Roosevelt and his big Demo
cratic congress will reach the legal
separation stage—just short of Reno
divorce proceedings.
The increase in unemployment re
lief and new pump-priming measures
will keep public expenditures at a high
level. Budget balancing cannot now
be hoped for until the end of the 1939
40 fiscal year at the earliest. Hence,
the trend of the past five years toward
inflation will continue. It is vital
that everybody remember this. Just
because inflation is not making head
lines now, do not conclude that It Is
not making headway, inflation Is the
biggest factor in the long-pull business
and investment outlook today!
Prices to Increase
Inflation is not simply a domestic
issue. It is a world-wide influence.
It is one of the reasons why I look
for some increase in prices in 1938.
The sharp drop in both farm and
industrial commodities since August
makes it easy to forecast the price
trend next year. Sensitive commodi
ties should begin their rise some
weeks before business. They are at,
or close to, their bottom now. But
doubt if the 1937 commodity price
peaks will be broken next year.
In fact, next December an index
of 174 raw and finished materials
should average only around 8 per cent
above the current level. Industrial
commodity prices will be the strong
est. Farm products prices do not
promise as much action. Leading the
rise win be non-ferrous metals, steel
scrap, and hides. The readjustment
between supply and demand is quick
er in these industrial materials than
it is in farm products. But the latter
will move upward somewhat from
present quotations.
Farm Outlook Pair
Nineteen hundred thirty-eight will
see sharper control over cotton, corn,
and wheat acreage. Prices will end
the new year well above today's levels,
Without a crop failure, however, pres
ent carry-overs are so large that they
can prevent any wild boom in quota'
tions. Moreover, I expect to see i
further drop In beef, hog, and lamb
prices. Butter, milk, eggs, and poultry
also will be cheaper next year, due to
lower feed costs.
It would be foolhardy to attempt
any fixed forecast of farm income.
Barring crop disasters, however, my
estimate is for total agricultural re
ceipts next year to drop 5 to 10 per
cent under the 1937 figures. Profits
are also going to average below those
for this past year. The goods which
farmers must buy will not be much
cheaper than .they were in 1937, while
farm prices will actually average
lower than they have during the
past 12 months. Because of the above
situation, farm land values will show
little change for the year.
Wages and Strikes?
Industrial workers, after getting
away to a poor start, should have a
fair year. During the first few
months unemployment will be serious.
Hundreds of factories have slowed
down or closed completely. There
are probably a million more Jobless
since last Labor day. But the unions
are clinging to their wage scales as
desperately as an antique dealer to
a family heirloom. Despite poor busi
ness in the first quarter, I do not
foresee any material change in In
dustrial wage rates next year—cer
tainly none on the upside.
One of the features of 1(38 will be
a sharp decline in labor's influence.
After a year of almost constant bick
ering and turmoil, workers will quiet
down. The labor cycle has passed its
peak. Just as 1936 saw the senlth of
the high-gTade bond market, ao 1937
witnessed the pinnacle of labor's
power for this cycle. The reaction of
the public and the current slump In
business have given the labor move
ment a rude set-back.
More Jobs in Fall
Employment will improve as 1938
works along, but should average leas
than in 1937. The reason? First,
business activity opens the year 33 per
cent below last January. Second, la
bor-saving machinery is being install
ed everywhere. Third, the railroads
will employ less workers. Finally,
"merit rating" systems in state unem
ployment Insurance laws will militate
against hiring temporary help. Hence,
by next December, the number of job
less should total about 6,000,000 against
6,500,000 row and 5,500,000 at the 1937
business peak.
Taken as a whole, 1938 will not be
as good a year for salesmen, mer
chants, and advertising people as 1937.
Tilings are pretty slow right now and
will continue poor into 1938. How
ever, as the months tick away, the re
sistance clouds should blow off and
by late next year the seller's market
should be on the way back. Then ad
vertising linage will have another
surge and commission checks will
again bulge. The 1937 national ln
oome—estimated at $70,000,000,000—
will not quite be equalled despite
1938's strong second-half sprint.
Retail Sales, Living Coats Lower
The national income roughly deter
mines the volume of retail trade.
Hence, I expect retail sales will aver
age less in 1938 than 1937. They will
be slow during the early months but
they will follow the strong business
uptrend as the monthly pages are
torn off the 1938 calendar. By next
Christmas, volume of retail trade will
have a good chanoe of breaking all
records since 1939. Shading of price
tags between New Year's and Easter
will help to boost sales.
This drop In retail prices is good
news for the householder. It looks
now as though the cost of living which
has been rising steadily since 1933
will give ground early in 1938. The
.average for the New Year, however,
should show only a minor drop as food
prices may touch off a new rise along
about Labor Day. Ftom current levels,
your clothing will register a modeat
decline by next Christmas food should
be up slightly coal will flhdw little
change fuel oil will be firm to lower
and rents will be unchanged.
Why Building Slows Down
One of the major cogs in this cur
rent business recession has been the
sharp letdown in construction. Build
ing material concerns and building
workers both shoved up costs out'of all
reason during 1936-37. A house which
cost 88,000 to build In December, 1938
would cost nearly 16,500 today. Na
turally, demand for new homes has
slowed up in face of this unwarranted
boosting of costs. Home building is
down 30 per cent from the 1937 peak,
is below a year ago. and is still falling.
My thought Is that It will continue
It is our sincere wish that
each moment of the New
Year be happier and bet
ter to you and yours.
Otto Dirlam
218 Main Phone 251
to drop until after business has begun
to retrace its steps late next spring
Sometime next year, however, heme
building should again be humming
along. The 1937 peak may even be
topped so that the average volume of
new homes for the new year oould be
above last year's level. The new gov
ernment housing program could also
give the Industry a big lift. It is even
possible that the home building boom
which I really expected to develop in
1937 will start lata this coming year
Real Estate More Active
Private non-residential construc
tion, on the other hand, will be lower.
I now see little Incentive for new plant
expansion next year. Public utility
work, however, may take up the slack
caused by PWA pulling In its horns
on public works projects. A decline in
building costs should help volume in
the early months but before 1938
closes costs will reverse their field
again and be on their way to a new
These higher costs will help real
estate values. New home prices,
which are now being shaded here and
there, will strengthen. However. I
hold little hope for an increase In old
house values, barring drastic Infla
tion. Good vacant property and mod
est well-laid-out modern homes are
among the best investments a person
can make today. For that reason I
feel that 1938 is going to be a good
year for realty men—with a slow start
and an active finish.
Stocks to Rally
This same rough plan should also
hold for stocks. I expect to see the
markets fly the revival signal before
1938 is too old. It would be silly to
predict they will, or will not, break
through their 1937 March peak. It
makes little difference whether they
do or do not, for good stocks at cur
rent prices, in my opinion, offer ex
cellent profit opportunities.
Furthermore, while selection will
again be important, diversification
will be the vital point in 1938. Some
groups will, of course, do better than
others. If I had to guess the out
standing industries of 1938 from a
market standpoint, I would pick the
metals, oils, building materials, air
craft makers, steels, chemicals, elec
trical equipments and mail orders.
The utilities may surprise investors
and the rails are so low that any good
news could give them a tremendous
percentage Increase in value. The
motors and rubbers offer less prom
ise because auto assemblies will be
below 1937.
Feature of Bond Market
The bond market will be influenced
more by business In 1938 than it has
e e n u i n a e y e a s e i u
grades have registered a terrific drop
this fall and I look for price in
creases in this group to feature the
bond market in 1938. Gilt-edge issues
are down much less than these
medium grades.
This situation offers a good oppor
tunity to make a few trades to im
prove yields and increase profit pos
sibilities. I make this statement for
I believe that the long-term trend of
high-grade bond prices is definitely
downward. Sound medium-grade
bonds should be a better purchase
for the next few months than senior
obligations. When money rates start
rising, high-grade bond values are
going to filter away slowly.
Trend Toward World Inflation
One of the major reasons why I
am so confident that higher money
rates are inevitable is the world out
look. None of the major nations and
few of the minor powers are today
operating on a balanced budget. Bil
lions of borrowed dollars, yens, marks,
and francs are being spent in mad
armament race. National currencies
are destined to become steadily
cheaper in terms of goods. Further
more, there seems to be only a re
mote chance of averting world con
flict: Through reciprocal trade agree
ments—and genuine spiritual re
President Roosevelt and Secretary
Bismarck UN
Steiks, Fish, Fowl
They've nothing to do with
the New Year, except in
directly. They're the kind of
things that will give the
youngster some backbone—
pull him through the tough
spots. Practical that's us.
But pretty pleased, never
theless, at a chance to say
Happy New Year to you all.
Central Meat Market
|1S fifth St. N. Dak. 1«S
Hull have done more for world re
lations in the last five years than all
the international peace conferences
of the past two decades! In spite of
terrific pressure from groups at home
the state department has pushed
steadily ahead with its trade agree
ments. They have negotiated sixteen
treaties and are now working on the
most important of all—with Great
Britain. Vast amounts of data have
ben culled over and the treaties have
had as their sound goal "the most
good for the biggest number."
World Trade OuUook
As a result, our sllare of foreign
commerce has shown a much sharper
increase than that of the world at
large. In 1937, for instance, our ex
ports and Imports were 34 per cent
higher than in 1936, while total world
trade was up only 25 per cent. This
year there should be modest gains in
overseas commerce, but the rate of
increase will slow up. I expect that
Scandinavia. South America, Oreat
Britain and her Dominions will again
be our best markets.
International relations will not im
prove noticeably in 1938. I think that
gangster diplomacy will continue in
vogue for another year at least. But
am convinced from my trip abroad
this fall that 1938 will see no general
war. I am not very hopeful over the
long-term future, however. A bitter
conflict seems inevitable unless a new
Christmas spirit invades the hearts
of men all over the world.
Great Bargains Today
The above is a good outline of what
I feel readers can expect in 1938. We
have come over a long hard road
Back in 1938
since 1933. I am confident that we
are not going back to those depths
this year! America Is suffering Just
now from an attack of business in
digestion complicated by a severe case
of Jitters. The ups-and-downs of
business seem to have been growing
deeper rather than shallower dur
ing the past ten years. This is be
cause the country is svfept by suc
ceeding waves of emotional distrust
and confidence, due to a weaker spir
itual foundation.
Just as in the fall of 1937 optimism
changed overnight into black pes
simism, so the current gloom can be
transformed into confidence again by
the stroke of a pen. For that reason,
I believe that there are now some
wonderful buying opportunities.
Stocks and bonds, homes and fur-
SHARK'S suit and overcoat
CLEARANCE starts Monday.
it trained in Hi* w«y» of
haiMM MpfNlRMS.
Funeral Home
Fhone 304 Bismarck
We take this means of express
ing to you our sincere g:ood wishes
for the coming: year. It has been
a pleasure to be of service to you
during the year now closing, and
we trust we have served in a man
ner to deserve your continued
patronage and good will.
May the New Year bring you
all the joys of a happy life.
Dakota National Bank
and Trust Company
Bismarck, N. D.
Affiliated with the Northwest Bancorporatien
Member FDIC
new Venn
H. A» Thompson &
The opening of the the year 1938 marks the advent of our 30th year of continuous
business in Bismarck. Th^s our wish for your prosperity and health during: 1988
comes from one of Bismarck's pioneer institutions, one which has stood the test
of nearly three decades. We resolve to continue to sell quality merchandise and
skilled workmanship by "men who know how."
H. A. Thompson &. Sons
Plumbing Heating Gas Fitting Air Conditioning
Headquarters for YORK Air-Conditioning and Commercial Refrigeration
We stock only the highest grade materials, Including Standard Sanitary numbing
lean Radiator Co. Conditioning Systems, HunidUiers, Attic Fans, Heating
Pipe and Tile, Roper Oaa Ranges, Reaner Radlantfires and Gas Heaters, Aim
LaFrance Ftre-FighUng EfriPMUt, Etc.
205 Seventh. St. Bismarck, N. Dak. Telephone 64
nishlwn, food and clothing, are, oa
soon will be, on the bargain counter.
Henca, my doting message today
Work for a mom honest and ieai
selfish America but do not let pres
ent timidity scare you away from to
day's great opportunities!
A hat, with its eyas covered by tape,
can stilt catch Insects in mid-air.
SHARK'S rait and overcoat
CLEARANCE starts Monday.
to all our customers. Thank
you for your patronage.
May we continue to serve
you in 1938.
818 Bdwy. Phone Ml
2?* I

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