The Business Outlook

By Keith Powlison, Ph. D.

Department of Research and Service

Security-First National Bank of Los Angeles

Address Delivered at the Tri-Annual California held August Conference of the Millwork Institute of 8, at Pasadena, California.

Since the lorv point in btt-*iuess activit,r- rcachecl itr 1(X)S, most relial>le inclexe,s are in agreemcllt th:rt on otllr- tu'ct occasions, three if 192-l is inclucled, has bttsines-r been depressed to a greater extent tl'ran at the present tinle. Irt i9t4 and ]n 1921 lc.rn'cr levels \\-ere reached. Clearlr- t'e are in the process of econouric atljtrstntent lllaclt trecessarr' by the uubalancecl der-elopnretrt l'l.rich took lllace cluring the precerling )'ears o1 1tros1>critr-. In tl.re 1)ost-\\-ar vears our productir.e capacit)' \\'as taxecl to its linrits to sup1ll1' the rnaterials ar.rcl equiltr.nent for u'orlcl-u'i<le recotrstrttctiou, particularlf ir.r tl're belligerent coutltrics. The tlatrtral consequence of tl"ris <leurar-rd \\'as exPaltsiotr, refittettleltt of technic, ancl consolidation of resottrces. IIass prorlttction, rvith its n-ranifolcl ecot-tontics, cmergctl artcl, irt l:rrgc tne:rsttre. macle possible the seetnittg paraclox of <leclining prices and stable, if not increasing, u-ages' The llasis for highet :tatrdarcls of expenditure n-as thrts establi.-sherl' Tl'rc ctr<l u-as not here, hou'ever. .\ neu'ly found ancl rl'idel1- tlistrilruted prosperitr. generatecl forces clesignccl to extentl it.eli stil1 further. The habit of cliscoutrtitlg frttrtre incotne, br. nrcans of installment pttrchases, \\'as exploited ancl the tletrlarrd for a lr'icle range of comrnodities, cspeciallv of the lttxurlclass, rcachecl t're,r, liigl-r ler-els. Arldetl to this, nright be mentionerl t1.re speculative tlrania, focussecl primarilr- otr the security markets, antl purchases of goorls. ftlr caslt or on creclit, predicatccl upon e xpecte<1 prohts f ronr srtcli activities.

The br-rbble l)rrr-st and thc inerlttalities, irrcgLrlarities :rrrcl maiadjustments of the 1>rececling pcriocl revc:''1ecl thettrselvcs in their nrost vivicl fornr. Nou-, as u-e r-icu'the situation from the perspcctir-e of dellression titlle s. u-t' ask the cuestion: "\\'-hat is the lrusiness otttlook?"

Confusion ancl perple xitl- rathcr tharl cliscoLrrits-cme nt ancl despair cl"r:rracterizc the attitude rr-ith t'hich thc ansu'cr to this question is approached. Nor is it strangc tirat this sllorrld lre the case. 'l'he leculrcrative pon'er of -\n-rerican hrrsincss has ner-er iailecl in the past to rcscuc ottr economic organization fronr conclitions nrorc severelr- cleltressed than those of todar'. l;aith in the f Lrtrrre ,,f .\tnerican enterprise has rtot bt'en lrist. l;rotrt tlte per:lr(c{11-c of the moment. the irnnretliate futurc is. hon'elcr. r'ie n'ecl u'ith confrrsion. Der-elopnrcnts since the stock tnalkct collaltse oi last f all have contribrrterl sr.rbstantiallr- to this state of rrrirrcl- I )rrlinq thc 1a:t fen- u'eeks oi 1929 the cottntrv u'as ....,',\ floodcd u-ith itaternents irotlt lee<ling busitress nrer.r to the effcct that the countrv s-as frttrrlamentallv sottrrd and tl.rat the cortrage()tls l)r()sectttion oi plans for expatrsitltt and it.npr,,r'r:tttrnt ri'orrltl lre sht',rtll rerr arclerl. These l-ere ttollorved bl erprcs.ions. eniAnatirrg fronr \\-ashington. desigttccl to disPrl tratiortal gl()(rltt.

[-ast lrut not lta:t. ccarn()nri:ts atttl re.earch orqar-rizations. irr recerrt ri'ceks lravc rlissernirtaterl their data and finclings lcarling t, r u'itlcl-r' rlive rgt'trt ct,ttclttsir,trs. \\-hich ,)nc is richt.' Uniortutratcl-r'. tlre tcchniclrrc oi f('rccasting has not lrce n pe rit'ctcrl t, r a tlcgi'ec u'hich pernrits of a Cct-laitt alt>\\'(l' 1', tlti: (lllC-1i, '1).

\clertheless. thcre arc factc,rs irr the irrc-eltt.itrration u'hich in<licate that lirtsirte :: [tctir itt tttar- reasottalrlv soon rec()\-cr sonren'lurt ft'r,ttt tht' ctlrrerrt sttlt-tttirttral letel. The plethora oi crerlit u'hich is availal,le in this c()tlntr\-at lotv ratcs shr,ulrl sr'r,n flnrl prolrtal,lq'enrPlc,-r'tttt'trt tlirr,ttglt ltanking arrd inve>trncnt ch:rtrttels. I'rorlttction has tleclinecl in the last vear at a m()rc rapid ratc thatr cr,ltsutnption. thtls bringing thcsc tu-r, factt,rs nrr,t'e tttarl-r'into ltalance. Inr-entorie s in tlte lrancls oi iabricat,,rs Attrl rlistrilrrttor. are not cxcessilc anrl in.tallrrrrnt purchasers al)pcar. ott tltc u-hole, to bc able to ll)ect their tilrligatirrlrs a: tlter'lrccotrte cltte. Cornnioclitr' pricc.. u'hilc .till clcclining. al)l)car to be apProaching a lcvel of stalrilitr-frtrnt u-hiclt busincs. inrProvemcnt ma\- start. ^'\. in tire ltast, br.tsittess nrav lte expected to turn for the better some months before commodity prices actually advance. Such l>asic industries as steel, brritdirrg and automoltile procluction, usually lead the .ivay in thi return of prosperity. While currort figures for these inclustries are not too encourar:ing, there is ieason to l;elieve that the basis for a moderatc revival is lteing established. Agri- culture is in that critical period l'hen most anvthing ian and_ often -does. l'rappen ancl l hen practicaliy nbthing. can with certainty lre predictcd. Sufflce it to sa1,, that in 192021,,cornmodity surpluses, price cleclirres, uncnrl;lovment, tariff provisions ancl general u.orlcl conditions'rvere far more discouraging tl.ran thcr. are no\\.. and yct ltusiness reco','erecl prornptll- and sulrstarrtially.

It is likely that the trentl of ltrrsiness on the Pacific Coast will be more nearly similar to that of the corlntry as a u,hole than it has been in previous cleprcssions. At the samc time it is also likeli' tliat the tleprission hcre rvi1l not lte as severe as it is in the mic1cl1c u'est and east becarrsc of tl,re man;' .{actors having an indcpenclent bearirrg rlpn11 c{rast cond1tl0n s.

The milh.vork industrr. is an inclispensablc part of one of our most funclamental economic activities. There is norv and, as long as men u'ork, eat, slccp and play in<1oors, thcre al'rvays u'ill lrc a demalrd for its lrroclucti and its serr.ices. And yet tl'ris irrdustry is lteset l,-i. problems of a scriorls order. On the clemancl side, "qr.rbstitution of stecl and numerous other materials for woo(l has made staggcring inroads on the volume of rnillr,vork rccluired. On the-iupply

Herman Rosenberg Will Go East On Business

Herman Rosenberg, of The Hipolito Compan1., I_os ,\r.rgeles, leaves early in Septernber for Texas anrl- other selling territories whcre Hipolito screens are clistribrrtecl. He will be Ilone several lveeks.

side, productive capacity has not been adjusted to the decreased use of milln ork irr tl.re last ferv years. A diminish- ing <lemancl is being scrr-ecl rvith an excess productive suppl1.. The simultaneorls operation of these trvo factors l.ras taken its toll in reclucecl profits ancl all too {requently in losses. Here and there the effort is made to market milirvork at lorv prices on thc b:rsis of equally low manufacturing.costs ma<le oossible by large-scile procluction. When selling prices arc cut before the lower- cost figures upon u'hich these prices are irrcrlicated har.e been lealized^ in the mil1, the resuit is usuallt. clisastrous. The annals of inrlustrv are replete rvith thc corpses of business enterprises u'hich havc failed lrecau.e iheir managers y-ielded to the large-volurnc ancl cut-rate price fetisl,r *hi.l., is so allurin-q. When Priccs rvr'thin an inclustry are macle rvithorrt referr:r.rce to costs accuratelv computccl, unsound credits frcclue-ntlv-crecp in. 1'he assrrinftion of a poor creclit risk at.high priccs has as little jrrstilication as ihe unprofitable price bascrl rlpon a souncl creclit rating.

The long terrn ontlook for llrril,line-for mi1l \\rork de- rrrantl-is gr.cl i' calif,,rnia. Nu*' iJ the tirne to put the industrl. in orcler. This is not an casy task. liuildeis must be solcl mill*'ork in ct,rrrrctition rvith srrbstitutes. ancr plant c_apacity must be brougl.rt into arljrrstment rvith clevel,oped clernancl. T1.rcrr, staltle ltrices scientifically computed, *tll.h rvill yield a. fair p.tg.fi!, togellher with iouncl ^credit prac- ttces, must be establishecl. This task can only be accompli,.he<l tlrrorrgh intelligent cooperation rvisely and coura_ geously clirectecl.

LEW

BLINN FLIES TO L. A.

L. W. "Leu"' Blinn, salesman for The pacific Lumber Company, San Francisco, will return September 2 from his vacation spent in Southern California. Accompanied by N{rs. Illinn he flen' from San Francisco to Loi Angele's Atrsust 16.

Announcement

V/e are opening a tract of the Old Grou,tth Yello'w Fir timber -a io-yea, Suppty- the r eal kind , nou) generolly so siqrce- close gr ain, sof t and c'lear . f or our famous.Super Finish a,nd the other high- grade clear items we make.