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T H E K I N G ' S B U S I N E S S
June, 1936
BABSON’S REPORTS
SPECIAL LETTER
Babson Park, Mass.
March 23, 1936
IF INFLAT ION COMES
By “ inflation” I mean the printing of currency to pay Government debts, as is being advocated by a large minor ity in Congress. Credit inflation is already with us although the effects o f it are not yet evident. Thank God the Federal Government has not yet begun to distribute counterfeit money! The chances, however, are four to six that coun terfeit money will be printed before we get out o f the pres ent mess. Only a spiritual awakening of the nation can prevent such a catastrophe. Hence we are advising clients to keep at least 60% of their invested funds for common stocks and not more than 40% for bonds, mortgages and callable preferred stocks. On our Supervised Stock List we endeavor to recommend only good stocks —those o f companies without too heavy debt, companies which should be able to weather political persecution either in the form o f heavy taxation or o f legis lation compelling dissolution into smaller units. Yet the purpose of this letter is not to advise you rela tive to stocks or bonds. Rather, my purpose is to emphasize that such are not the only or the best investments. In case o f a real smash—which only a spiritual awakening can pre vent—very few o f the pieces o f paper in your city safe de posit box would probably be any good. Otherwise, the political dictators would probably make you empty your sa fe . deposit boxes and accept counterfeit Government money therefor. What Congress recently did in making us all turn in our gold and accept paper in exchange can easily be repeated and applied to all securities. (Note what happened in Ger many during the war and what is now happening in Italy.) When you realize that most all the stocks and bonds in your city are in only a dozen or so vaults, which now are under Federal supervision, you see how very easy it would be for Congress to take them away from us. When we look at the situation from this viewpoint, it seems as if the chances are greater than four to six that you will see trouble. “ All right,” you say, “ then what can we do about it?” I will tell you. First —we should develop character and health for ourselves and others. With the danger o f infla tion staring us in the face it is utterly foolish to sacrifice one’s character or health to save money. We should stren uously retain the health which we have and try to get back what we have lost. W e should have a complete physical examination by trained diagnosticians once each year and follow their advice as to habits, diet and mental attitudes. Second — we should spend money freely on devout tutors and servants of the highest type. This probably means high-grade church schools and small colleges o f the right character for our children. No amount o f time and money is too great to spend upon properly educating and training children. However much money we ourselves now have, the chances are four to six that (if we live long enough)
we must depend upon our children or grandchildren to sup port us. Hence we should immediately begin to invest in themS-to store up money in children instead of safe deposit vaults. Third — we should get a small subsistence farm upon which our family can spend at least their summers working. If possible we should not live in a large city. I really do not see much hope for city families. I sometimes wonder whether children can truly be educated except by work ing with their parents. This is almost impossible in a city. For those not having such a farm, I especially commend high-grade summer camps. These are performing a very* important service. Here is a simple economic fact to remember: The quart o f milk which we raise and drink always has the same value whether the dollar is worth 100 cents or 2 cents! The safest way to save that value is to turn it into character, health and education. All other investments are very spec ulative, and this includes Government bonds, savings bank accounts and insurance policies. Insurance companies will pay their policies in paper money; but what good will the money be? This is the important question. The best insur ance policy is a small self-sustaining farm and a bunch of good, husky, intelligent kids. There are, o f course, other hedges against inflation, such as real estate, fine furniture, rugs, jewels and works o f art. A good library may be considered an investment; in fact, anything which improves rather than deteriorates, with age. Commodities are a hedge; but most o f these are perishable. Yet commodities under ground— such as oil, copper, iron, coal, etcE-may be valuable provided the own ers have self-control to leave them and go without divi dends until the inflation craze passes and the country again returns to an honest dollar. Uncut timber should be a very good inflation hedge. In short, put your savings into tangible things— or com panies which own such. Avoid large cities as you would smallpox centers. Large cities have caused the downfall o f every nation which has thus far collapsed. Only a spir itual awakening can prevent the large cities of this country from falling into the hands of dictators, who by currency inflation and other means will try to rob the nation. If a revolution comes to the United States it will be between the cities and the rural districts. I suppose you think I have had a bad night— or eaten something which disagreed with m e ! Not at all. Never felt better in my life. I, however, have had a chance to think during the past two months. If you will go out on a 12,000 acre ranch and spend 60 days working and meditating you’ll come to the same conclusions. But whether you agree with me or not, I do ask that you wrap this letter with your last “will and testament” for your heirs to read. Better still, send for an extra copy and keep it to read yourself once in a while. ROGER W . BABSON.
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