Evening star., 1941-01-01
Wide eProsperiiySeen
An Artificial Basis
For Present Year
Extreme SeIectiylty
Expected to Prevail
In Stock Market
By G.. 7. GIBBONS,

f1lIDIt UDlLPQ BUSINESS CFINlCe.
Statistically, 194l will be a year
Of increasing activity and advanC-
ing prosperity. However, we shall
not fail to recognize this apparent
T prosperity for what it is-an arti-
fetal structure built upon an in
Satlable demand for the equipment
and Instruments Of war. whose only
purpose Is either organized deStruc-
ton, as We are now Witnessing in
Europe, or protection from such
destruction.
The industrial activity generated
by this demand produces nothing
that contributes in a permanent way
TO the weIl-being Of the people.
Nevertheless, through increased
employment and higher wages. it
VIII serve to distribute purchasing
power more widely. The demand
thus created will expand the pro-
ductlOn Of consumer goods. except IN
lines where it is necessary to divert
raw materials. equipment, or skilled
labor. to armament use
Capacity opera tons III the basic
durable goods and war industries,
along with an increasing amount of
armament work in other lines. Will
mean heavy demand for industrial
raw materials, equipment. and sup
plies. The steel. machinery. aircraft
armament. shinbuilding. and elcc-
trical equipment industries will
operate at practical capacity
throughout 1871.
Further Peaks Indicated.
Order baCklOgs in these lines are
already huge, and the creation Of
additional producing capacity viii
lift operations to new highs next
year. This in turn will boost aC-
tiviry further in the non-ferrous
metals. chemical, lumber, rubber,
and numerous other lines.
Larger inventories will be car
ried in 1941. This, however. will lie
a favorable condition with consump-
ton increasing, prices headed up
ward and priorities being put into
effect. Ultimately, heavy inven-
tories Will be a potential threat to
business. but not during 1871 when
shortages are more to be feared
than Overbuying. Inventory build
ing and price buoyancy will bring
sporadic imitation scareS, but these
VIII be Offset largely by intensified
efforts to prevent sharply rising
prices from impeding armament
pTogress.
Poor export prospects and excess
Sive supplies Of farm products con-
stitute the major price depreSsants
as the new wear begins. Conditions
are expected to be more favorable
to sellers than buyers. Peace in
Eurone would necessitate re-
appraisal of price prospects in most
commodities. but it appears i'm
probable that real peace Will occur
in 1941, and a general policy Of
keeping consuming needs amply
protected seems advisable.
Extreme SeleCtivitV will charaC-
terjZo the stock market over the
coming year and investors will be
required to exercise more than ordi-
nary discrimination in shaping their
investment programs. To make
money in the kind Of market that
we are witnessing today and prob
ably will continue to see for some
time to come investment policy
must lean more and more toward
f1eXibiLtv.
Defense Will Boost Stocks.
Certain common shares represent
ing heavy industry or lines where
earnings will be supported by de-
fense building will become increas-
ingly popular with income seekers.
Here is where discrimination must
be exercised to the utmost. Many
of the old faVoriteS among stable
income equities are being hard hit
by excess profits taxes. Even the
present normal tax puts full divi-
dend payments Of some such COM
panies in question, and more will
be thrown in doubt as levieS are
further increased next year.
Thus as funds are shifted from
doubtful situations to stocks offer
. ing greater assurance of maintain
ing present dividend rates. We will
see many drifting lower as others
move up The pressure OF invest
ment funds seeking better employ
ment will be an important sustain
ing force in the market, and as the
year progresses. the overflow will
reach farther and farther down the
scale Of quality.