FINANCE AND INVESTMENT
By CUSTOS
PRICES have been rising this week, but not on the Stock Exchange. In fact, Throgmorton Street is beginning to get exercised about the pace of the rise in wholesale and retail prices which must already amount to about 12i per cent. over the pre-war level. Wages, too, are moving up as they must if the worker is faced with a higher cost of living, and so people are wondering whether the Government is really going to succeed in avoiding the vicious spiral of costs and prices. I admit that things have not started very well, and am prepared, as I have previously emphasised in these notes, for a moderate rise in the price-level, but I still feel that there need not be any dangerous inflation. That is why, although I like equity shares, I think it would be foolish to buy them to the exclusion of fixed-interest stocks simply on the strength of their merits as an inflation hedge. And let us remember that even as a hedge against inflation there are equities and equities. What with the uneven incidence of rising prices, the uncertain rise of taxation and of the Govern- ment's powers of control, these are days when the investor must look before leaping.
Then there is the war itself : is it to be a long one, ex- tending up to the official " three years " or beyond, or is it to be over, as the optimists feel, in twelve months or less? Clearly, nobody knows the answer, but equally clearly if one did know it would be a tremendous help in formulating investment policy. On the long-war theory one should be investigating the possibilities of shares, now modestly priced, which must benefit from war conditions, such as Canadian shares, many other oversea companies, come commodity shares and some of our own industrials. If we are banking on a short war we shall be willing to pick up shares which have been badly hit since the outbreak and which would re- bound sharply with the advent of peace. In this category I would place the equities of the West End stores, entertain- ment shares, such as film, hotel and greyhound issues, shares of developing gold mining companies. Most investors will probably admit that they have no very strong views about the duration of this oddest of wars, but there is no harm in their realising the importance of the investment implications.
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