The Kennewick courier-reporter. [volume] (Kennewick, Wash.) 1914-1938, 1937-11-18
ECONOMIC HIGHLIGHTS

ECONOMIC HIGHLIGHTS
Quoting Newsweek, Perhaps new
er in history has there been as wide
q divergence between the state Of
business as revealed by earnings re-
ports and the level of stock prices
Measured by third-quarter earnings
industry and trade are almost boom
ing in this country; measured by
stock prices, business is definitely in
the doldrums.'
With the exception of auto, auto
parts and food products companies
which showed moderate declines in
earnings for the first nine months
OF this year as compared with the
same period in 1886, the earnings
picture is very good. A representa-
tive group of chemical companies
earnings are up 28.5 percent; build
ing material makers up "a percent;
oils up 1919 percent; steels up 263
percent; utilities up 1873 percent; a
miscellaneous group of big COM
panies, including such strange bed
fellows as A. T. g. T., Gillette and
National Distillers, up 246 percent.
With earnings at these high levels
Why, then, are stock prices sagging,
along with business confidence
that psychological factor which is
sometimes more important than the
hard, unimaginative production fig
ureS? There are a number of rea-
sons. r.
In the first place, it appears GER
tain that fourth quarter industrial
earnings will be substantially below
both third-quarter of 1887 and the
forlrth-quarter of 1886 earnings. The
reason: Industrial production has
been dropping, led by one of the
most important industries, steel,
whose production touched Al per-
cent Of capacity in recent week as
against 50 percent in April and IL
percent in 1892. Consumer indus
tries have been going slow on plac-
ing orders with heavy industry, be-
cause Of uncertainty as to future
conditions and the trend Of prices.
In the second place, the tax prob
lem is more involved now than ever
before. Business feels that such
taxes as the Undistributed Profits
levy and the Capital Gains levy are
decisive detriments. The proponents
OF these taxes feel that they are
necessary to protect us against an
other inflationary boom of the 1928
variety. Decisive factor in the dis
pute Is the Administration, which
has had little to say and champ
Toned these taxes In the past. Hope
full sign, from business point of view,
Is the unquestionable increase in
Congressional sentiment for repeal
or radical revision of the taxes If
this goes far enough, some think Mr..
Roosevelt will take the lead and
advocate changes.
In the third place, the thought of
another depression, even a minor
one, is sufficient to send chills run
ming up and down the spines of
both business leaders and govern
ment officials. Reason: The coun-
try is in no shape to Withstand a
sharp drop in income, production
and earnings. In 1929, the govern
ment debt was low, and business re-
serves were high. Today the gov
eminent debt is at it's all-time high
and business reserves are low,
having been spent during the bad
years to keep concerns alive. In
other words, in 1929 we were eco
prepared for depression;
Today we are not.
In the fourth place, a large per-
centage of executives and big in
vestors are convinced, rightly or
wrongly, that this administration is
following the wrong track in rela-
lion to private industry, is tending
toward dictatorship, has unspoken
ambitions to make the u. S. into
Collectivist state. Whether this
point of view is mistaken or not, it
cannot help but be a Oppressive
factor.
In the fifth place, the foreign sit
lation, coupled with the feeling that
this country must inevitably become
involved on any major foreign en-
no matter how wisely
the administrations leadership, is
IN uncertain and frightening ele-
nent.
This does not exhaust the list of d,
factors contributing to the present :
confused outlook, but it gives the -.
most important. Forecast is an ex- :
hazardous undertaking to- ..
lay, and the forecaster is liable to !,
ind himself out on limb before {
ong. However, opinion is that in ,,
lustry will be relatively quiet for :
. few months to come, with secur-
ty prices moving erratically in a !.
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