Looking Ahead

By Alvan T. Simonds, President Simonds Saw & Steel Co.

Climbing Cycles of Industrial Production ItrIlIIE

When the stock market smash came in the last week of October, 1929, President Hoover with his usual good sense and foresight realized at once that something must be done to avert serious depression, that something must be done to brace up weak knees, to change the psychology of the great mass of people in the United States from a psychology of despair to a psychology of hope.

Frederick William Wile in the Washington Star, in speaking of the president's energetic 'and helpful efforts, says in substance that the president realized the nation's house was on fire and called out the nation's economic fire department. Let us hope that before the nation is called upon to go through another similar experience, the nation's house will be provided with a sprinkler system so that when any part of it gets too hot, water will be thrown upon it and the danger of fire eliminated.

First study the chart. Notice that each major movement of industrial production is preceded and forecast by a corresponding movement of money rates. Observe that since the first of January, 1928, the present downward movement of industrial production has been forecast. Beginning with M"y, 1928, this was reported regularly in "Looking Ahead." What a pity that it was not known to those who were buying and holding stocks in the months preceding the speculative smash at the end of October, 1929, and who were justifying the advancing prices of stocks on the ground that 1929 would bring no major downturn in business.

Then notice particularly that money rates in the short time since November I, 1929 have fallen ftom 6r/a per cent to 5 per cent and are now (December 15) forecasting a major upswing of industrial production to begin, without much doubt, at or shortly after the middle of 1930. The usual seasonal swing from January to April, 1930, is likely to occur, but this will be a'minor swing. It will not reach a point as high as the peak in 1929.

There could be no better time than now to see clearly that major swings of money rates forecast and are followed by major swings of industrial production. Just now, because money rates are falling, practically everybody is convinced that this will be followed before long by increased business, by an upward movement in industrial production. It is almost unbelievable now that when commercial money rates were so rapidly rising in 1928 and the first half of 1929, practically no one was convinced, or could be, or would be convinced that such a rise would be shortly followed by a decline in industrial production and in general business. As a matter of fact, the downturn in business came about eighteen months after the upturn in money rates. Study the chart and draw your own conclusions as to what is ahead.

If we remember rightly, both Mr. Ifoover, then Secretary of Commerce, and Mr. Mellon gave warning in the spring of 1923 that some lines were over-producing and that there was danger of a repetition of the experience of L92O-192I. This warning was followed almost at once by a decline in business activity-the recession ol 1924. Business men do not like a recession, much less a depression in business. Neither do they (notwithstanding the contrary belief of the Saturday Evening Post) like over much those who warn them that a falling off in business is ahead or those who throw cold water upon their exuberant optimism, no matter how wild thev may become.

President llooveris plan for leveling the road of business was announced in the report of the Conference on Unemployment in 1921. In short, it is to fill up the valley ahead by taking off of the hill which comes before the valley. This to be effective, of course, should be done before business gets down into the valley. This was not the case in 1929. Business is now slowly going down into the valley, but the profits made at the peak of l9D are still available to help fill up the valley which seems to be ahead. Therefore President Hoover would have business corporations spend now all the money they can spend wisely or that they will need to spend in the near future and which they can just as well spend now. He would have the Federal government and the State, city and town governments spend now, all the money that they have available or that they can raise for improvements that are needed and that they can afford to make now.If everyone cooperates heartily with the president, there is no doubt but that great good will be accomplished and that the valley will be at least partially filled up and the business road made more nearly level than it otherwise would be.

Several traditional beliefs have been shattered bv the speculative smash. Among these is the belief thai the stock market discounts by some months the major fluctuations of business because the consensus of buvers in the stock market is a consensus of the best business and economic minds in the nation. Contrary to this belief, five million speculators'could be and \Mere wrong. Stock market prices inluly, August and September,1929, were not q safg guide to the course of business in the fall of 1929. Stock prices did not turn down in a major movement until after business had turned down in a major movement in June, 1929. It is safe now to believe that stock pri,ces will not turn up in the next major movement until after business has turned up in its next major movement. Too few follow the course of business carefully enough to know when it has turned up or down as soon as they might and should have known. The Bulletin of the Federal Reserve Board showed that the manufacture of food products reached its peak in December, 1928; automobiles in March, 1929; textiles in May,1929; iron and steel in June, 1929; and all manufactures in June, 1929; also that the mining of all minerals reached its peak in February,1929. From these months on, each month has been below the peak. What added information was needed to save stock market losses in October and November or. to make stock market gains by selling short in August or September? This information of course corroborated the forecast made in "Looking Ahead" regularly, begihning with May l, 1928.

Now is the time for optimism, not for excessive caution. Caution was what we needed in the first half of. 1929 instead of excessive optimism, but anyone who advocated caution at that time was liable to be shot at sunrise, unless, like Jefi, he did not get up early enough.

Frank William Prideaux

Frank William Prideaux, died in San Francisco on December 24, fram pneumonia after a week's illness, at the age of. 52.

Mr. Prideaux was outside salesman for the Chas. Nelson Co., San Francisco, and had been in the employ of this concern for 19 years. IIe was a native of San Francisco.

He is survived by his widow, Mrs. Mary Elizabeth Prideaux, four sonso Jack, Frank, Jr., Louis and James Prideaux, and two daughters, Gertrude Zahler and Rose Lannin.

Changes in Coos Bay Lumber Co,'s Sales Staff

George F. Grant is now covering the Peninsula and Coast Counties territory for the Coos Bay Lumber Co., formerly worked by the late A. A. Rantala.

Stewart Smith, who formerly worked out of the company's Los Angeles office, will work the Sacramento, Sonoma and Napa Valleys, replacing Mr. Grant.