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REAL ESTATE
AND
i^ BUILDERS
[Pill,
NEW YORK, APRIL 24, 1915
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FINANCIAL CHANGE AIDS "BUILD NOW" PLAN
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Effect of the \ctivity on the Stock Market Upon the |
Construction Situation—How Prosperity is Produced |
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OI>SER\'MRS of buildiny: finance have
noted, with satisfaction, signs of the
times indicating a pronounced upturn
in general business conditions'. There is
a growing opinion that the building in¬
dustries and miterial manufacturers
have seen the worst of the depression.
Optimism is the rule to-day, not the
exception. Business men since the first
of the year have spoken of business as
being good, but collections slow. They
speak of business to-day as brisk and
with collections improving.
Great industries are contemplating ex¬
tensions to plants, notalily the Sauer-
Mack Automobile Company, the Ameri¬
can Locomotive Company, the American
Macliine & Foundry Company, the Cruc¬
ible Steel Company of America and the
Bethlehem Steel Company. The Lehigh
Valley Railroad, according to President
Thomas', is ready to spend a million on
improvements, President Truesdale of
the Lackawanna Railroad, has been out
on the road in contempation of a great
expenditure of money. The Central Rail¬
road of New Jersey recently has placed
an order with Harlan & Hollingsworth
for steel cars and have more orders of
the same character to give out. The
New York Central stands ready to re¬
lease car, locomotive and rail orders.
Cement Prices Low.
In the l)uilding material market Port¬
land cement shipments for March in¬
dicate, if maintained, an annual produc¬
tion of 100.000,000 barrels, or 12.000.000
more than ever has been produced in a
single year. Prices are very low. Com¬
mon brick is conspicuous as being the
only building commodity that is over
produced. Lime, crushed stone and sand
are in such demand as to require in¬
creased plant capacity. About 1,500
more union artisans arc employed to¬
day than in the same time last month.
And the Eastern building season is
hardly under way.
Stock market transactions have re¬
cently exceeded a million shares a day.
More than $20,000,000 in gold has been
sent this month to this market from
Ottawa to insure continued credit for
English Iniyers here. The lawmakers
of state and nation liave about reached
the end of their labors, a fact which
doubtless inspires renewed confidence in
all kinds of investors and especially in
the hearts and minds of captains of in¬
dustry. Savings banks are reporting in¬
creased deposits. They arc actually re¬
developing their surpluses.
Bank Surpluses a Sign.
The first sign of returning prosperity
is not always to be found in the number
of orders for building materials reported
nor in tlic condition of the real estate
market, nor in the condition of the
United States Steel Corporation's table
of unfinished steel orders. Instead, the
first signs should be looked for in the
condition of bank surplusses.
Some may entertain the mistaken
notion^ that the shrinkage in the surplus
of saviiigs banks is of little consequence
to the individual depositors in these in¬
stitutions, and that therefore such
SIGNS OF PROSPERITY.
$20,000,000 in Gold Returned to
the U. S. A.
Stock Exchange Transactions 1,-
000,000 shares a day.
Savings Banks are Developing
their Surpluses.
Industrial Plants are Building Ex¬
tensions.
Railroads are Releasing Orders
Long Held Up.
Skilled Building Labor is Better
Employed.
Current Business-Baiting Legisla¬
tion Nearing End.
Building Materials are in Better
Demand.
Money for Construction is Easier
to Obtain.
shrinkage cannot have any effect upon
the placing of railroad rail orders, struc¬
tural steel business or the purchase of
lime, brick and cement. But this is a
serious error.
Savings Banks* Surplus.
It is necessary for the savings banks
to maintain a certain surplus as a matter
of prudence and precaution and to in¬
sure their solvency beyond peradventure.
Therefore, as the existing surplus began
to dwindle because of the depreciation
of the niarket value of the securities
held, it became necessary to restore by
degrees; the lost portion by making ap¬
propriations for the purpose out of cur¬
rent earnings. Such appropriations in
turn, diminished the amount which
would be distributed in dividends to de¬
positors, and hence these depositors
have been receiving considerably less
than would otherwise have been the case.
New York savings banks are all
mutual institutions, the profits going en¬
tirely to the depositors and on the basis
of the current rates of return on the in¬
vestments in which savings banks are
allowed to employ their funds, the de¬
positors in these institutions ought to
be getting 4j/ per cent per annum in
dividends. As a matter of fact some of the
largest institutions wete paying only 3V2
per cent, having had to reduce to that fig¬
ure owing to thc necessity of using part
of their current earnings in order to
make good thc impairment of their
surplus account.
Savings Bank Securities.
Large quantities of savings bank
securities are invested in railroad stocks.
In Maine, during 1913, 50 per cent was
thus invested, in Connecticut 38 per
cent, and in New Hampshire 33 per cent
Massachusetts, New York and New
Terse)' ratios ran irom 15.96 per cent to
19.61 per cont. The number of de¬
positors in these six states numbers
almost 7,000,000 people. Combining the
railroad investments of insurance com¬
panies, and educational institutions with
those of savings banks, about $1,464,-
388,642 in railroad securities were thus
held.
When American gold is being shipped
abroad in large quantities, as marked the
period immediately following the out¬
break of the war, the manufacturer, the
real estate investor and the prospective
builder cannot readily effect loans to
tide him over a consequent period of
poor collections or commercial paralysis.
The only alternative was to shut down.
Hundreds of savings bank depositors
were thus deprived of their incomes and
instead of depositmg they were com¬
pelled to withdraw nioney. This resulted
in a shifting of funds in the banks to
retain a safe reserve which cannot be
recovered from railroad securities be¬
cause of decreased earnings in the
traffic departments. Building construc¬
tion suffered.
Revival of Business.
It is just such a period from which we
are emerging. The railroads are be¬
ginning to feel an increased amount of
business. They asked and received, in
some instances, a 5 per cent, freight rate
increase which partially makes up for
the sub-normal freight shipments. When
thc danger is passed with the adjourn¬
ment of the legislatures, of additional
lousiness-baiting legislation and if the
full crew bills are repealed, the earn¬
ings will be increased, the demand for
railroad stocks will improve, savings
banks can again begin to pay dividends,
the building investment niarket will
regain its strength and materials will
begin to move into new construction
work. This is what is happening to¬
day on the Stock Exchange and in the
building material market. It is shown
in increased employment of skilled
building artisans.
Predictions Fulfilled.
The Record and Guide, in its issue of
January 30, said that the big interests
of the country were advised of the turn
for the better and were planning to
build. They knew what was in store for
thc securities niarket. To-day their pre¬
dictions are fulfilled. The New York
Stock Exchange had not known what
several consecutive million share days
were like, in several years. People are
more confident. They are reinvesting
their money. And real estate will be the
next in line to benefit because money
is being made more available to "Build
Now."
A wave of confidence is rapidly
spreading over the country. The enor¬
mous buying power is being turned
loose, and its beneficial effect is being
felt, at thc present time. This is. how¬
ever, only a beginning. Those who are
in intimate touch with the situation
cannot see anything but a long swing of
prosperity in the immediate future.
Real Swing Launched.
Last November the Record and Guide
printed reports from several leaders in
various lines, in which the present move¬
ment was clearly forecasted. It was also
pointed out that before the final move¬
ment was commenced a "false start"
would appear. This happened last Feb¬
ruary, but now the "real swing" seems
to have 'been launched.