FINANCE AND INVESTMENT
By CUSTOS
Jr is hard to keep pace with the mental acrobatics of Sir. Stafford Cripps, One week we find him giving industry a pat on the back for its faithful adherence to voluntary dividend limita- tion. The next he is strenuously defending compensation terms meted out to the iron and steel industry which to any impartial mind look like a gross injustice to companies which have faithfully played the dividend limitation game. On May i8, in his speech on the second reading of the Finance Bill, Sir Stafford argued that one reason why prices were so high was because of "frightfully high profits." This week at the Labour Party Conference at Blackpool he has rejoined the side of the angels and told his Labour Party critics that it is a mistake to think there is any easy way of turning large undistributed profits into reduced selling prices. He went further and added : "You cannot possibly find any solution to our present problems by juggling with money incomes or finances or fiscal measures. We need, and we must have, more and more efficient pro- duction if we are to solve our difficulties without loss of standards." It is clear enough that Sir Stafford's views as politician are one thing and his views as austere Chancellor of the Exchequer are quite another. I am inclined to believe that his " real " views are those which he expressed this week at Blackpool, but I am not at all convinced that he has succeeded in converting the extremists of his own Party.
COMING TEST FOR INDUSTRY It is this suspicion which helps to explain why the Crippsian triumph over the wild men has had no perceptible effect in the stock markets. In the City most people fear that some time during the. next twelve months British industry will be required to face up to conditions of keener competition, especially in 'overseas markets, and that during this coining period of test it will have the handicap of inelastic costs. Admittedly some industries will be able to reduce their selling prices from the high levels which have been practicable in the phase of sellers' markets and that will help to cushion the contraction in sales which probably lies ahead.
The real problem will arise when these easy adjustments have been made and further cuts are needed to maintain the volume of turnover. It is this kind of situation which Sir Stafford Cripps had in mind this week when he warned the Party that overseas trade was becom- ing more and more difficult and that the economic barometer was not rising. Against this background it would be foolish to look at this stage for anything more than temporary and technical rallies in industrial Ordinary shares, and I do not recommend purchases either for the short or the long view.
SHELL'S HIDDEN RESERVES
It is a pity that the Shell Transport and Trading Company has not yet been able to solve the problems presented by the issue of fully- consolidated accounts, but stockholders will, nevertheless, be grateful for the 1948 report. It contains a great deal of additional information and can claim to give a comprehensive picture of the affairs of the group. One new fact which emerges is the immense hidden reserve of L123,793,000 in the excess of the market value of the group's quoted investments over the book figure of £41,069,000. The liquid position is also impressively strong, thanks to the recent new, issues of capital in London and New York. As to conditions in the oil industry, the Shell chairman looks forward to a further gradual increase in consumption, but tells stockholders that conditions of a sellers' market have already given place to buyers' market conditions over practically the whole field. As one might expect, Shell's attitude towards this change is wholly favourable. The fall in prices from the peak levels is described as "a healthy corrective." In short, this powerful group, which has developed to its present strength in conditions of keen competition, looks forward to a renewal of the fight for markets. From the short-term Stock Exchange angle the approach of keener coriipetition with reduced profit margins is not calculated to arouse much enthusiasm. On the other hand, the Shell chairman's confident statement underlines the merits of Shell kr Ordinary units as a long-term holding. Quoted at just over 43, to give a yield of nearly 5 per cent, less tax, they are among the most attractive investments in the market today.
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