The daily independent., 1937-04-01

(3) LABOR RESTRICTIONS.
There are now a number of bills
before Congress which would fur
ther increase labor costs. Among
them is one calling for a SiX-hour
day with pay for eight hours. An
other shortens train lengths. A
third calls for full crews. 1t is
believed that these three bills
alone would take S600,0o0,0OO
more out of the carriers pockets,
but their passage is doubtful.
"a HIGHER MATERIAL
COSTS. All companies whose
selling prices or rates are fixed by
public regulation are in a bad
position in times such as these.
Material costs are mounting stead
lily. Steel and iron prices touch
ed a new top since 1929. The new
Guffey- -VinSon Bill will lift coal
prices. Meanwhile, freight rates
and passenger fares do not go up.
Furthermore. if we had real in
flation. with prices rising almost
aidly, the carriers would be hog
tied.
FIXED ASSETS" favorable
long-term facsors):
% BASIC INDUSTRY. No
matter what political system we
adopt, railroads always will be a
basic necessity for moving heavy
freight. 1t is roughly $500 miles
from Hudson Bay to the Gulf OF
Mexico. and $500 miles from the
Atlantic Ocean to the Pacific.
Over this vast area stretch some
275,OOO miles of railroad. At
least 60 per cent of this mileage
should be a permanent integral
part of our industrial life.
~ MANAGEMENT n o w
AWAKE During the first GEN.
tury, the railroads only compet-
ition was from stage-coacheS and
canal-boats. The great urge to
improve service, which competi-
Uion provides. was lacking. Like
most sick" industries, the major
cause of the carriers difficulties
rests with their managementS.
Perhaps the most optimistic factor
IN their outlook today is the new
attitude Of railroad boSes. They
are now paying more attention to
the operating experts and less to
the banking kibitzers with start
ling good results.
FIXED LIABILITIES" tunfavor-
able long term factors):
ID COMPETITION. Not
withstanding the new fighting
spirit of rail managers, the hand
writing on the wall is plain. Ger
tain classes of business that once
belonged solely to the rails, must
now be shared permanently with
other carriers. The airplane, the
| motor-truck. and the bus will
continue to cut into rail earnings
and may prevent them from ever
reaching their old-time peaks.
q LABOR AND GOVERN
MENT. The railroad industry is
dominated by a powerful labor
group which will continually skim
the cream OF rail profits. The
industry is saddled with a tre-
mendous funded debt which it
cannot pay off under existing tax
schedules. Most carreiSr missed
bankruptcy by only a hair in the
depression. A majority of the
roads that escaped will ge under
the auctioneer'S hammer in the
next. with the United States Gov
ernment as the most likely buyer.
The Canadian Government al
ready owns one of its two major
railroad systems.
TRIAL BALANCE" Over the
| near-term. l EeeI that the favor
able factors over-balance the un-
! favorable. Business is just en-
tering period of prosperity; car
loadings are still Is per cent un-
der the 1929 high; and the price
of rail stocks and Second-grade
bonds IS we'll behind other groups.
Hence, I believe that carefully
selected rail securities will sec
higher prices during THIS period
of prosperity. The longer-term
however, is more blurred. With
the carriers tremendous funded
debt, their increasing competi-
ton, and their labor straight
jacket, my warning to investors
is: Don't sell rail securities now,
but keep them near the top OF
your strong box so that you can
quickly Gull them out sometime in
this current cycle,"
Copyright. 1887. Publishers
Financial Bureau