Henderson daily dispatch., 1937-08-27

ment buying, merchants are unWlse
~ plugging such business much as
brokers foolishly pushed margin
trading in 1929. Hence, this next de
preston may start in Main Stree
rather than in Wall Street
Public debt is another dynamite
key. Every man, woman and child
in this country now owes about $43o
in local, State and Federal debt TIL:
debt is increasing monthly. The Urea.
surys deficit Since July first is $3.50,
100000, or $75,0OO,O0O greater than {
year ago at this time. Relief expenses
nigh as they are, are not responsible
The increase in permanent depart
ment expenses is to blame. Some day
public debt will get too high Just as
stock debt got too high in 1929. Then
government bond prices will break. A
ten-point drop in Such bonds (banks,
own so per cent of them) could cause
panic worse than that of eight years
ago. Moreover, we are lot closer to
such smash than we were last yeas.
at this time.
Can Washington Ease the Pain?
Many people feel that Washington,
while not being allie TO prevent an
other depression, can at least shorten
us length and severity. / disagree. I
believe exactly the opposite I feel
that the country is going into the next
depression with so much more debt
and so many unseasoned laws that
the panic may be worse than the last
one. Consider employment, for in
stance. While millions of workers lost
their jobs from 193O-34, other millions
were kept on the payroll by consider
ate employers who felt they could get
along with less personnel. Now with
the new unemployment Insurance pro-
gram and the precedent of Federal re-
lief, employers and communities will
quickly dump the whole load in
Washington's lap.
The vicious new undivided profits
tax" severely penalties companies in
attempting to build up reserves in
good times to see them through hard
times. Hence, concerns will slash ex-
penses and lay-off help at the first
drop of the hat. Then, too, the stock
market is extremely "thin.' When a
real selling wave hits it, prices could
break 80 to so points. Also, Wash
ington will be far less prepared to
handle this next depression AS we
stepped off the precipice in 1880, Fed
eral debt was only $16,0OO,OO 100000 To-
day it is more than twice that and
growing rapidly. Furthermore, at the
rate we are going, it looks as though
the relief rolls from the last panic
will not be emptied before we set sail
on the next depression.
Is Bull Market Over?
Now to answer my question, "How
high will stocks go?": My Babson-
chart can forecast the Depression
Area. 1t can not, however, now esti-
mate the ultimate size of the current
Prosperity Area. It's chief value as a
forecaster in times such as these is
to show how far into a period of
over-expansion business has advanced
Today it is five per cent above normal
compared with % per cent over nor
NAL at the peak in 1929. A study of
past property periods on the Babson-
chart shows that the biggest half OF
every bull market in stocks, excepting
one, was over when business crossed
bO1 AAAcA. AAC1lOC1 1CdAAAC Il1dI I1lC
cream may already be off the mar
ket. In fact, the time is not far off
when shall personally begin to sell
some of my weakest stocks in the
weakest industries.
1 may be too early in doing this.
In fact, I have found that most of
my investment mistakes have come
from acting too soon. That is why
am not going to try to pick the
exact top of the market and sell out
all at once. I'm going to average
OUT by selling a few stocks at one
time, a few months later, and con-
tinue the process as stocks work high
er and higher. The only possible flaw
I see in my program is the threat Of
initiation. To stave off the inevitable
panic, the government might launch
a currency initiation program that
would create the widest boom we
have ever seen. Eventually, of course,
the boom would collapse; but in the
meantime those who kept their funds
in cash and bonds would have been
wiped out.