October, 1950
 
                   BUSINESS AND INVESTMENT PROSPECTS
 
       The recent favorable turn of events in Korea makes it
timely to reappraise business and investment prospects and
to review our investment policy.
 
Present Business Conditions
 
         Practically every measure of business is at or
above its postwar high with the exception of raw material
prices as a group which have been moderated in their rise
by agricultural surpluses and good crops, The following
tabulation places current conditions in perspective by
relating them to prewar levels and to preceding postwar
highs.
 
Pre-1950 Postwar
 
[table of economic conditions]
 
 
          A significant point not discernible in the above
figures is that the rise leading to current levels began
during the early part of this year well in advance of the
Korean war. This indicates that forces other than the
effects of the outbreak in Korea were important
contributing factors. In our opinion, as stated in earlier
memoranda, these forces
included widespread belief that the policies of the
Administration were essentially inflationary, as evidenced
by enlarged peacetime and armament expenditures financed by
a deficit, by a labor policy favorable to annual wage
increases unrelated to productivity, and by extremely easy
credit terms, especially for residential construction.