Henderson daily dispatch., 1937-07-09

near future. Inc UTILITIES are IOO SOOu
source of taxes for weakened ana
cowardly politicians to let alone. Ac-
tually the death sentence hanging
over the industry is relatively unim-
portant as compared with the mount
ing burden of choking taxation.
Higher Rates a Myth.
This tax question shows how easy
it is for political quacks to bulldoze
the public. High rates and public
milking" form the main point on
which the political utility-baiters
hang their case. Yet the average do
nestle electricity bill last year was
only nine cents per day per family.
The total cost of electricity to all
families in the United States was less
than motorists pay in taxes alone on
gasoline; and only two-thirds OF mere
ly the taxes on tobacco and liquor. In
the last twenty-five years the cost OF
living has increased A per cent, but
the cost of electricity has dropped 30
per cent In the face of this record,
the American public, noted for its
sense of craftsmanship, should call
halt on the utility raid. But until the
public knows the facts, the 100000
power investors can hope for no fair
play.
The second question-that of infla-
ton and it's effects-is equally dis
couraging. Study what happened to
power companies in Europe under in
flation and you will come to only one
conclusion: Sell securities in steam
generating plants if you think radical
=, fl fior ic onnoirau Hudrn-n1p0friC Sc
curities fare somewhat better because
they have no coal or oil costs to be
inflated The initiation we have al
ready had boosted sharply prices of
copper, coal, lumber, cement, and
other major commodities which are
used by power companies. With rates
constantly going down and COM
modify costs steadily rising, the utili-
ties deserve more help rather than
more taxes.
Big Gains Over?
The third question-that of the
general business outlook for the ma
tion-is more encouraging. Power
consumption since last Labor Day
has been holding to almost straight
line around 2,2OO,OOO,OOO kilowatt
A.
over the same period of a year ago
are still running from eight to II per
cent but the gap is slowly narrowing.
BY September, the gain may be en-
tirely wiped out. However, / believe
that the basic trend of general bust
ness is upward and that before long
all previous industrial highs again
will be smashed. Hence, I advise a
gainst sacrificing utility securities at
this time.
Then, too, there are possibilities for
new power markets which have not
yet been developed If the electric
cookers and water-heaters go over
with the American public as well as
the electric refrigerators have, twice
us much domestic juice could be sold.
But do not get too optimistic merely
on prospects of heavier power con-
Electricity output today is
IS per cent above the same week in
1888. During this period, however,
utility earnings have, improved less
than half as much. Hence, investors
should not bank too. heavily on high
er security values 4 because of long
term possibilities Of increased power
sales. Watch taxes. n
4 . Pushed Too Low.
I! A study of a group of 80 electric
companies shows that the ratio of
current stock prices to earnings is
only 13 to /. A similar study of 30
well : known industrials shows that
their price-earnings ratio is II to l.
This means that utility bearishness
has been over-done. I am still hold
ing my power stocks because I be-
lieve in Newton's Law of Action and
Reaction. Thirty years study have
taught me that the pendulum always
goes too far in one direction before
it swings back. feel that the bet
ter utility issues will sell higher dur
ing the next market upswing. How
ever, I warn investors that most hold
ing-company common stocks should
be sold after this current period of
excessive utility gloom clears away.