Milford chronicle., 1961-01-06


Instead of covering general busi-
ness as separate topic, l am sure
that a reading of the following
will give a clear idea of my
thoughts on general business. Ma
turally, my first subject will be the
political outlook.
POLITICS AND THE NEW PRESIDENT
l do not expect any big changes
under President Kennedy. If he
had won by a landslide l would be
quite worried, but with a narrow
plurality in the electoral college
and only a small fraction of 1%
over Nixon in the total popular
vote, | think that our new Presi-
dent will be very much on his good
behavior. Certainly he will not
have much influence with either
the Republicans or the Conserva-
tive Democrats of the South. He
may make radical recommenda-
tions in his inaugural address to
save face, but most of these Vsl
not become legislation.
He will recommend certain new
welfare legislation, which will in
clude medical care for the aged,
an increase in Social Security, a
new minimum wage, increased
public housing, help for the dis
tressed areas, and more aid for
education.
COMMODITY PRICES. INCLUDING GOLD
Higher prices of commodities at
foi
certain, but wholesale prices will
probably decline in most instances.
Prices will not rise because of in
| flation during 1861. The first of
| the price advances will be absorb
ed by the manufacturer. Owing to
the increased competition in all
| lines, wise manufacturers and re-
tailers will keep their selling
prices down. This means that their
profits will be less if they are un-
able to reduce their own costs. All
of this means that general busi-
ness may show less increase in
activity and profits in 1861 than in
| the previous year.
Now, in relation to gold: Three
ffths of the Free Worlds gold
comes from African mines; one
fifth from Canada; and the bal
ance from the u S. and elsewhere.
There are many rumors that the
U. S. will "revaluate", creating a
higher price for gold This will
not happen during 1861; and ]
think that the price of many gold
stocks will decline during 1861
The very discussion in Congress OF
possible devaluation would cause
us to lose more gold. Everything
will probably be done to avoid
such a discussion and l believe
President Kennedy will publicly
state that he is opposed to it.
Temporarily, dollar devaluation
might be a shot in the arm for
| American business, but it will not
cure the cancer of whatever else
| is causing the pain. Not only
would foreign banks withdraw
gold before such legislation was
passed; but if such legislation
should pass in the U. S., it would
be followed by similar legislation
in England, France, Switzerland
Germany, and other important
countries. I advise investors now
to forget this question of gold de.
valuation and not speculate iI
| gold stocks at this time. Leading
gold stocks are now selling 25H
or more above their price of 9
!year ago. Another thing that in.
vestors should remember wheT
buying Canadian gold stocks is
that a number of Canadian golC
mining companies are now receiv
ing a subsidy from the Canadian
government to keep them from be
ing shut down by high labor costs
This subsidy would come off a,
the price of gold rises.
STOCKS AND BONDS
It is unpopular for me to TAX
a bearish position in my Annua
Forecast. Most of the newspaper
and my readers like optimisti
forecasts. In all the years I hav
been making these forecasts, las
December was the first time tha
l refused to take a definite posi-
tion At that time the Dow-Jone
Industrial Average was $40 ant
today it is f1uctuating around 60O
Corporation earnings report
now coming out are not good. II
many cases the gross is kept up O
perhaps increased, but the net i
off. Many companies will show ;
decline for 1860 compared witt
1859. Prosperity has continued 81
long that most manufacturers, re
tailers, and consumers are assum
ing it will last at least anothe
\ year. cannot honestly agree witt
this. Therefore, l feel that 1856
will see lower prices for the Dow
Jones Industrial Averages. I hop
that many readers with small bus
inesses are showing profit. Thos
who are not should begin to re
duce their loans and trim thei
sails.
In many cases good bonds nov
yield more than good stocks Thi
is unfavorable to the stock mar
ket and favorable to the boni
market Therefore, | believe tha
bonds will continue around thei
present levels in 1861. Many read
ers will be wise in shifting nov
from certain stocks to bonds
There will be reductions in stool
dividends; hence it would be mucl
better to hold bonds with fixed-in
terest payments rather than risl
a reduction in the dividend pay
ments of stocks. l especially cal
readers attention to "tax-exemp
gen eral obligation municipa
Department Head Is