ANOTHER SLUMP?

Evening Post, Volume CXXV, Issue 19, 24 January 1938, Page 12

ANOTHER SLUMP?

SMALL INDICATION

POSITION EXAMINED

The uncertainties, not to say weaknesses, of the Stock Exchanges in almost all countries during the past few months have given rise to various explanations, with prominence given to the delicate international - situation, particularly in the vicinity of the Mediterranean and in the Far East, and the collapse on Wall Street (freely regarded is a reflection of the struggle between Big Business in the States and the New Deal headed by President Roosevelt). More recently the weakening of the franc has been viewed with concern. ' ; Many persons, informed. and misinformed, have been wondering whether the first clouds of a new depression are on the horizon. The perplexing element, particularly on the London Exchange, is that share prices have weakened while the industries represented by the scrip have, seldom borne a more flourishing appearance. The matter has been freely discussed by proranent writers in the overseas financial and economic Press, some of whom have forecast not exactly an industrial slump, but some decline from»the present level of industrial profits and dividends. Others express more optimistic views. Those who are best able to form an iopimon-are probably the managers of companies controlling large investment funds, as it is their business to study trade tendencies and shape their policy accordingly ■ The editor of the "Financial Review of Reviews" says that he discussed the subject with the, directors and managers of investment, trust, and insurance companies, and also with international banking houses and issuing houses. The writer/ of a memorandum he received on investment policy expressed the opinion that' interests in investments bearing a high degree of English industrial risks should be reduced .in view of the possibility of declining industrial activity. CHANGE OF SENTIMENT. He stated "that the evidence of any such decline, though definite is slight, and perhaps based more on the change m sentiment than anything else-the feeling for instance, that after five years of rising prices, a change in trend cannot be far away. "Among trade indices the only one that* lends support to this is the building index; nevertheless the. pressure for deliveries of raw materials and primary products has .greatly eased. Inquiries from industrialists tend .to show that shortage, for example, of iron dnd steel no longer exists and thai deliveries can now be obtained without much delay. .' Moreover under the stimulus of high prices,-there is now recurring over-production of some primary commodities so that storks are again mounting. .; ■■An Important consideration -as the change in market sentiment. • The formfr'bull' market has disappeared and sentimont has veered round to the belief that prices should stand at levels offnrriine-a higher return which . includesf Substantial risk premium Even if industrial activity persists at the present level, the combined effect of the known adverse factors, such as higher wages and costs, may tend to impair profits. HAB PEAK BEEN PASSED? "The cuipose of . -is note is to exfrom Ifld On the question of cheap ffoney there are prominent economists whS think that interest rates will dethe kind of background money ha been greatly strengthened by "he experience of last spring when the danger of inflation was averted by Governmental action. This affords ground for the belief that any recurrence of these conditions will find the Gf"vernment equally determined to protect money rates from being carried ?er as was the case in 1929 because they do not exist."