The Washington times., 1929-01-04
PERIL MAY LIE
ON ROAD FOR
PROSPERITY
By MERRYLE STANLEY
RUKEYSER

NEW YORK, Jan. 4.-Buslness
Is confronted. as the new year gets
under way, not with the menacing
clouds Of adversitg, but with the
peyiis of prosperity. The major
problem of business statesman.
ship in 1929 will be to continue
the, delicate balancing of forces
that lie behind the current eco
nomic activity which in sundry di.
rections is establishing new high
records in terms of physical vol
tune and also in terms OF business
profits.
Unlike year ago. no short-term
recession Is creating shortages
which will later have to be made
up. In the convention, old-fash.
ioned sense, there are no impof-
tant domestic shortages. That is
admittedly an element of technical
weakness, though as long as the
present momentum lasts, that con
sideration will be of no great prac.
tical significance. On the other
hand, there is a new conception OF
shortages. Old buildings will be
replaced by modern ones, railroads
with too many curves and bad
grades viii be Strengthened out,
highways win be improved and the
struggle will continue to raise the
living standards OF the average
man.
Little Danger Seen
A higher living standard will
be financed by a stretching of
the buying power of the average
pay envelope through a further
reduction of economic waste.
Modern methods of mass produc-
ton and scientific distribution
will help to make the consum-
er's dollar go further, and en-
terprises that contribute to this
trend will be the most prosperous,
and less efficient business units,
which are asleep to the demands
of the time. win be subject to
continued heavy mortality. Only
q short term initiation of COM
modify prices. which is not in
sight at least for the near fu-
ture, would interfere with this
long term trend.
Prosperous companies face a
golden opportunity to raise capi-
tai cheaply. High stock prices
make 1t feasible for successful
corporations to get permanent
funds without making definite
commitments. The o m n &
months are likely 20 be marked
by further striking increase in
stock financing. If the tax fac
tor Is left out of consideration,
q company has everything to
gain and nothing to lose In ask
ing printers to engrave additional
certificates and offer them to Sc
ing to clamor for common stocks
at high prices, AS long as this
avenue for financing is open,
corporations seem little fandi-
capped by the prevalence of high
interest rates which make new
bond financing relatively mat
tractive.
Trend Is Upward
Moreover. as. long as the stock
market trend Is upward, business
men seem optimistic and ready to
make forward commitments. un-
deferred by the highest interest
rates In so years. The building
trade, which is si1gularly depend
ent on the cost OF capital. is most
vulnerable to high interest rates,
but even here experiments in
stock financing are being made.
That the new public preferences
for common stocks as long term
investment is more than q transi-
tory phase of the bull markets Is
suggested by the announcement by
one of the oldest and most re-
spected bond houses In the country
that it had formed q subsidiary
company ITO deal in carefully Sc.
lected equity securities of public
utility and other corporations"
The parent company has dealt ex-
cllIsively in bonds. debentures and
notes since 1882, but the sabsid.
larry has been launched ito serve
investors whose requirements in.
clude junior securities of corpora
tions whose earnings management
and sound business character con
form to our own standards" That
routine announcement constitutes
a landmark in the struggle Of
stocks to win recognition for
suitability for the portfolios OF in.
vestors. as well as spectators.
Copyright. I9eg, hy Universal News
aervirel