San Antonio light. [volume], January 01, 1923, Annual Financial Edition, Image 1

About San Antonio light. [volume] (San Antonio, Tex.) 1911-1993

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financial
Summary ITll
of the JL J
Nation
.
Business Is on Sound Foundation
Special Correspondent of The San Antonio Light
Copyright, 1922, by The San Antonio Light.
New York, Jan. I—The year of 1922 has seen the un
scrambling of virtually every g-e at industry in the United
States. Business, which for a time rested on the scaffolding
and false work of abnormal and subnormal conditions, again
is on a sound, solid and permanent foundation.
No boom is in prospect. There are no indications of fren
zied price movements. Competition will be keen and profit
margins will not be great. But there is every indication from
present conditions that business activity will continue to in
crease and the level of the industrial and commercial pros
perity will continue to rise at least for the next six months.
New standards of comparison have been adopted. Mer
chants, manufacturers, farmer and business men in every line
have realized at last that neither the pre-war days of 1914,
the hectic activity and tremendous profits of the years imme
diately after the Armistice nor the dark outlook of the years
of depression and deflation extending to the beginning of this
year, represent any longer the normal level of business.
Business at New Normal Mark.
This country, right now, is experiencing a greater pros
perity than its citizens generally realize. The pendulum of
business is hovering at or near that new normal mark whicn
this year’s progress has established. That pendulum is never
still, the upward swing of prices and production has not been
completed. Its momentum bids fair to carry it on for an
other six months at least and perhaps longer. Any. -swing
U 3& probably will be at the same steady pace as the advance
and will be confined within the same well regulated limits.
Three great factors have marked the difference between
the depression of 1921 and the prosperity of 1922. They are
I \volume of production and sales, increase in the buying power
of the nation and management. When the year opened
scarcely an industry in the country was operating on a normal
capacity basis. Many plants were closed entirely. Many
j ioncerns had written off or absorbed high priced inventories
] >ut others still had goods which they could not move, clog
ging their advance.
Demand, however, began to improve materially in the
l\second quarter of the year. Merchants either wrote off their
Hosses or averaged out their high priced inventories with the
tlmovement of goods obtained at cheaper prices. Buying was
I but it was steadj’ and demand increased pro-
1 4portionately.
Basic Industries Near Capacity.
As a consequence, at the end of the year, the great basic
ndustries of the country are operating close to capacity and
he greater number have orders on their books which viL
ceep them busy at an undiminished rate for months to come.
The steel industry, one of the surest indicators of indus
naTactivity, just as wheat is the agricultural index, has ad
duced production from the extremely low point at the open
ug of the year to well above 80 per cent of capacity for the
.hole industry. Individual units have attained even higher
Ltes of output and for some months have been turning out
(roducts at or above 100 per cent of normal.
Unemployment Has Disappeared.
Unemployment was a pressing problem when 1922 open
l. States, municipalities and social and charitable organi
itions were asked to co-operate with the federal govern
ent in meeting it. Today, unemployment practically has dis
»peared. There is a job for every man who wants one and
sco're of employers to beg him to take it. So great has been
e demand for labor, both skilled and unskilled, that indus
es are still raiding each other for men, and scores of enter
ises are hampered in their progress by inability to obtain
s workers they need.
Wage advances were an inevitable consequencejif these
iditions. The United States Steel Company set the pace
• the industrial world by an advance averaging ten per
it. This example was followed in hundreds of other in-
I tnes. In building trades, skilled artisans have been able
liost to name their own terms. Payrolls jumped forward in
Ls of millions monthly and buying power was thus in-
By J. C. ROYLE
Factors in Improvement.
THE SAN ANTONIO LIGI
San Antonio, Texas, Monday, January T, 1923
rougbout
rate for
Practical s iKy Great Industry in the United States
♦ small way. telephof
Has BeSS .scrambled During the Year Just Ended
pwla.
and VFBte There Is No Evidence of a Boom or
/invarin!) .
Frenzied Price Movements, There Is Every
Probability That Business Activity Will
Increase Steadily and That for the Next
Six Months Prosperity Will Rule.
creased far beyond any exnectalions existed at the open
ing of the year.
The increase in the volume of money available for indi
vidual purchases was not confined to wage earners. In
comes of investment holders were increased not only in the
general betterment in business conditions, but also by the re
turn to a dividend basis of companies which had reduced or
suspended dividend distributions, and by increased payments
by others which had been swept forward on the crest of the
business tide.
The farmers, also, have attained a far higher standard
of buying power than was expected when the year opened.
Prices of agricultural products did not keep pace with ad
vances in othei' lines, and the situation of the farmer was fur
ther weakened by lack of transportation facilities at a time
when they were needed
But the farmer, in nearly every instance, got himself
out of debt. He made his crops cheaper than he had for
years and was left with a surplus which he was able to de
vote to purchases, long delayed, of both necessities and lux
uries. In addition, his credit situation has immeasurably im
proved and there still remain unsold over two billion dollars
worth of farm products. The proceeds from these products
eventually will find their way across the counter. In the
South, the rapid and continued advance in the price of cotton
has put the growers in a more satisfactory position than they
have occupied for years.
Prices for finished products advanced generally through
out the year but they did not move upward proportionately
with the increase in wages, raw materials, and cost of pro
duction. Producers hesitated to make further advances for
fear of stemming the tide of buying and forcing a renewal
of the socalled “buyers strike” which had been a bugaboo in
1921.
As a consequence, margins of profit were small. Manu
facturers, Wholesalers, and retailers met this situation suc
cessfully bj increased . efficiency in manufacturing and
sales methods and, in some instances, by mergers and con
solidations. Quality and service, too long neglected as fac
tors in merchandising, again are being stressed. For the
first time in years, the policy that “the customer is always
right” is operative. There are fewer salesmen on the road
but they are better salesmen.
Advertising, especially’ newspaper advertising, has been
an agressne weapon in the hands of the merchants. Esti
mates compiled today’ indicate that the volume of advertising
this year exceeded that of any previous year in history and
surpassed the volume of 1920, the previous record breaking
period, by between 12 and 20 per cent. Moreover advertising
this year has been free from the taint that it was used as a
hiding place for business profits rather than as a developer
of sales volume.
The three great strikes marked the course of business
during 1922, the textile strike, the coal strike and the rail
way shopmen’s strike. Great as was the depressing influence
of these wage disputes on commerce and industry, theii re
sults were not entirely’ disastrous, kore than once, business
was poised for flights toward inflation. It is possible that the
Annual Financial Edition
Buying Pcv.r Increased.
most.
Margins of Profit Small.
Advertising an Aggressive Weapon.
The Three Great Strikes.
labor controversies acted as a brake against too rapid ad
vance and resulted in a steady and healthy’ improvement
free from the danger of acute relapse.
The coal strike, while it delayed operations and lessened
production throughout the industrial world, had an effect
more phsychological than reaj. Reserve stocks were depleted
and prices advanced somewhat but few plants were forced to
draw their fires entirely and production of coal jumped
rapidly’ back to, or above, normal when settlement was con
cluded. Danger of shortage for domestic uses has not en
tirely’ passed although this is due more to lack of transpor
tation than shortage of production.
Shortage of Railroad Equipment.
The rail strike was far more severe in its effects. Hardly
an industry or business but suffered in some way or another
from the shortage of freight cars and poorness of motive
power equipment. This lack of equipment was not due en
tirely to the strike. There are fewer cars in bad repair to
day than for a long period, but the strike served tn empha
size the fact that equipment was totally inadequate to meet
the heavy requirements of normal business and crop move
ment.
Conditions have improved but still are far from satisfac
tory. But railroads have entered upon the greatest equipment
campaigns in their history. Orders for thousands of cars aie
being placed each week and the carriers give evidence that
they do not again intend to be in a position where they must
turn away revenue freight. —
Water and truck transportation received an impetus as
a result of the strike which will be felt by the rail carriers
for years.
Textile Mills Recovering.
The textile strike in New England was the longest drawn
out in the history of the textile industry in America. Begin
ning in February, the last rumbles of its discord have just
died away. Both sides lost millions, but while thousands of
spindles were idle, stocks of cotton goods diminished to a
point where the inevitable increase in prices was the more
readily accepted by the consuming public.
A marked innovation following negotiations during and
after the rail strike was the determination of many roads to
deal each with its own men through the formation of so called
“company unions” and the announcement by certain of the
natiohal railroad unions that hereafter they would negotiate
with each road individually.
The tariff undoubtedly was a potent factor in many in
dustries. The most general reaction, however, was a feeling
of relief that the schedules finally were settled and that busi
nessmen could make their plans accordingly.
Building the Business Mainstay.
It becomes increasingly evident at the close of the year
that building construction was the pillar which upheld the
structure of business while the new girders of other indus
tries were being forged and swung into place. The total
value of new’ construction in 1922 has been well over $4,000,-
000,000. The scope of operations was 40 per cent greater
than in 1921 and thirty per cent above the totals for 1919
which had been the record year up to this time.
No obstacle sufficed to check these tremendous opera
tions which affected every section of the country and were
almost as marked in the rural communities as in the cities.
Prices for materials advanced decidedly during the year.
Wages jumped to unprecedented heights. It was no unusual
thing during the past year for plasterers, bricklayers and
plumbers, what with extra work and overtime, to earn over
$lOO a week. Common labor in the building trades was paid
at a rate unequaled except in the most active days of the war.
Housing Shortage Still Acute.
The activity of the operations survived failure of sup
plies, delays in delivery of materials and wage disputes and
even the approach of winter served to slow’ the pace only a
trifle. Undoubtedly this was because the housing shortage
still is so acute that nothing could halt the movement.
It was due to the wise policy of the producers of build
ing materials, however, that progress was so steadily main
tained. Lumber manufacturers, cement makers and brick
producers guarded carefully against runaway markets and
| as a result prices, while they advanced, did so gradually and
without causing panic or uneasiness.
Much of the building inaugurated was for business pur
j poses but the mainstay of the movement w r as the desire of
American citizens for homes.
Never before in a similar period have so many dwellings
been built and never before have they been so complete and
attractively furnished. This trend has been constantly fek
in the sales of carpets, rugs, furniture, and household goods. •
which have been maintained at a high mark throughout the
year. Ample capital continues to be available at reasonable
rates to finance building operations.
Companies Increase Dividends.
If further evidence of the prosperity is needed, it is to be
found plainly in the dividend declarations of the last month
of the year. Four out of every five companies w’hich made a
profit in 1921 reported an increased profit in 1922. With
few’ exceptions companies which paid dividends in 1921
maintained or increased them in the current year.
Hundreds of companies declared extra dividends or in
creased their rates of distribution. This does not refer specifi
cally to the number which declared stock dividends but to
those which paid actual cash to their stockholders.
Increases of capitalization and distribution of stock divi
dends and bonuses were the outstanding features of the lat
ter part of 1922. Capitalizations and subsequent stock dis
tributions to shareholders totaled far above one billion dol
lars in book value. What they amounted to in actual value
still remains to be seen.
Without question, many companies took this method and
opportunity of transforming profit surplus accumulated in
this and previous years, into working capital. Some adopted
this means of making paj’ments of such profits to stock
holders in a form not subject to taxation. There is little
doubt that still other companies followed this popular policy
for appearance sake and still others accepted it just as any
other trend of fashion whether in finance or apparel is seized
upon.
Value of Assets Unchanged.
In potential value, however, the value of their holdings
undoubtedly were increased by this extraordinary develop
ment of business and finance. Earnings are the things which
will separate the corporate sheep from the goats. If com
panies can maintain dividends at or in proportion to the pres
ent rate on the new capitalizations, the profits to share
holders will be enormous. If they cannot do so, the market
value of the securities will reflect that fact sooner or later.
There is every indication however that business profits
will be increased in 1923 more than they have been this year.
Margins of profit have increased with the advance in com
modity prices. Buying power has increased with wages which
have shot upward faster than the cost of living. Buying power
however is not being misused. The demand in nearly every
section centers around useful goods, but buying is featured
by inquiry for better quality and larger volume.
In many lines, producers now have orders on their books
which will insure continued and profitable operations near
capacity for months to come. Supply and demand rather than
artificial inflation of prices or speculation have determined
the business trend this year and bid fair to continue to do so
in 1923.
joule Duunu iv
Some industries are bound to lag behind the genm
trend. Business failures will not be eliminated, for prof*
will depend more than ever on volume of turnover and <
cient management. Seasonal and sectional conditions
cause recessions in the price advance from time to tim
sooner or later the pendulum of business will start tc M
backward. I HK
But business and banking conditions generally
sound basis. Old debts have been cleaned up, stro
credit have been established and savings are pil
record rate. Business is unafraid and is equi’ ■—
1923 with confidence and courage. •■■■■■
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Profits Greater in 1923.
Some Bound to Lag.
Annual
Review
of
Business