Connecticut western news., 1922-07-20
ROGER BABSON PREDICTS
 FREIGHT CAR SHORTAGE
Freight Car Congestion Leads to Higher
 Prices

During the past week Roger W.
 Babson has been in New Yorl in
 consultation with important railway
 interests. He has returned believing
 that a freight car shortage is mevi-
 table this fail, and everything
 possible should Oe done to prevent
 it. Concerning the same MT Edison
 states as follows:
 'There are various events which
 indicate a serious congestion of
 freight this fall. First there is a
 real shortage of equipment in good
 condition. Thru~out the war the
 equipment Of most railroads was | allowed to run town. Little was
 done to repair this equipment until
 this year. Durrn.r the past few
 months railroads have been endea-
 vcring to do five years repair work
 in one. As result a great many | freight cars are either in the process
 of being repaired or are waiting to be repaired. In either case they are out of service. It is true that many
 of these cars will be back in service by winter but they will not be avail able by fall. This means that there are fewer cars availabic' today to haul freight than are usualyl avail able.
 "Usually the railroads haul h?ir coal during the spring and summer. The winter supply is usually dcliY- cred by the railroads during the summer months. Thus far this year very little coal has been hauled. Only immediate needs have been taken care of. Yet only two more months remain before people will be starting their furnace fires. On the assunlp- tion that the miners will soon be back to work this means that the railroads will be deluged with coal during the remainder of the year. Every available car capable of haul ing coal will be pressed into service and the coal tonnage should be very, very heavy
 ''The outlook today is for good crops this fall. At prevailing prices the farmers will want to sell their grain and move it at once. This means that the railways will be called upon to move a tremendous amount of grain while they are at temptign to move the coal. There are factors which lead one to believe that manufacturing as a whole will be more active this fall than it has been at any time this year. Funda- mental statistics indicate that the low point in business will be reached la I will be taxed by hauling raw mater ials in general and manufactured products of all sorts"
 MT. Babson was then asked what i effect such a congestion would have upon commodity prices and securi- | tics. To this he replied as follows Freight car congestion inevitably | leads to higher prices. This is only | natural as prices are determined, not by costs, but by supply and | demand.
 If a city naturally uses 30 car i loads of potatoes a day, any day | that there is a shortage of only two | or three cars, the price of all the ] potatoes in that city goes up. An ObllSA dS1y "IlCI IIlGIS lS d SuI plus O1 | only two cars, the price of all the potatoes goes down. Price is not determined by the total quantity of a product produced or consumed, but rather by that small percentage of surplus or shortage. A freight congestion this fall would inevitably lead to a shortage in certain raw and merchandise in some AS a result these commo- dities will temporarily strengthen in price at these points. Such a result is inevitable.
 Strengthening commodity prices are often-altho not always-pre- ceeded by strengthening security prices. The stock market usually discounts rises in the commodity market. Thus a congestion of freight might mean both advancing commo- dity and security prices. Further more, in the case of a freight con- gestion, the railways should tem- porarily, at sleast, show very hand some earnings. Already the rail ways are showing very good earn ings owing to the high rates and reduced operating expenses, not the fact that they are hauling very little freight. If the time comes when the railroads will carry 1001t capacity, these earnings should be very large. Large railroad earnings should tend for higher prices for railroad securities. A word to the wise is sufficient"
 General business according to the index figure of the Babsonchart stands at 174t below normal the same as last week