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Lethbridge Herald Newspaper Archives

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Lethbridge Herald, The (Newspaper) - June 3, 1970, Lethbridge, Alberta ____Wednesday, Juno 3, 1970 IMC IETHBRIDGE HERAID William M'dlimhi Wa Street's Ups And Downs YORK Wall Street picked itself up out of the gutter last week, feeling bat- tered and rough round the edges, but hoping that the worst was over, at least for the time being. There was general agreement among brokers and analysts that the sudden sharp improvement in prices though largely technical, indicated that the market was bottoming out or was in tire general area of the bottom. But nothing had changed in the economic, social or international cli m a t e to justify longer-term optimism. The uncertainties that had help- ed to bring the market tum- bling to its lowest level since November were still cloud- ing the future. Tlie stock market has little to sing about. "As an indus- said one broker, "it is in recession." Before prices start- ed to slide from their high noint in December', 19G8. many firms had expanded to handle an in- creasingly heavy volume of shares. They had invested in computers and other expensive equipment, moved into bigger offices and enlarged their staff. In the course of the slide, they have tried lo economize. Staffs have been thinned out, and many firms have cut salaries. But expenses are still high, while commission earnings are likely to remain low for a con- siderable time. It is estimated that, over a period of 18 months, securities on the New York and Ameri- can slock exchanges have fall- en hi value by an astronomical million. Investors all over the country about 30 million of them have suffer- ed. One broker said drily: "You can assume that the legal staffs of companies here are busier than ever. Disenchanted custo- mers may even be suing firms for improper advice." Af they survey the damage, brokers blame Wall Street it- self as much as the govern- ment for what has happened. Mr. Lucien Hooper, senior analyst of W. E. Ilutton and Company, has heen in the mar- ket for 52 years. He told me: "Fundamentally, we have been in one of the great speculative, periods of the century, based on too much money. That has collapsed. People have specu- lated and lost. This generation won't speculate in a big way again. Because of what happen- ed, there will be a low volume of trade in shares, and condi- tions will be difficult for bro- kers. A lot of analysts and what you call customer's men have got to be washed out. Stocks won't go down much more, but there will he a period of low enthusiasm." Like many oilier people on Wall Street, HooDcr places much of the blame for the dis- aster on the "performance cult" of the "go go" unit trust man- agers, known as "gun sold Iheir he said, "on the theory that it is possible to accumulate capital at 30 to 40 per cent a year compounded. Maybe you could do that in 1937 and 1938, but sure as hell not in 1970. The "go-go" men and their customers have been badly burned, and many small in- vestors are likely to be fright- ened away from the markels. As one Washington housewife put it: "With prices going up all the time, file market was the only place going for you, if you wanted extra money for a trip or a color TV set. Now If the hope of a quick killing has died, the more conserva- tive idea that equities are a good hedge against inflation has also been badly mauled. The start of Wall Street's troubles is now generally traced back to 19G5, when the Johnson administration began escalating its war effort in Vietnam, without raising taxes to cover the increased military expenditure. The resulting in- flation coincided with what a unit trust executive called "a tremendous s u r g e of specula- tion on the stock market an old-fashioned boom." The ex- pectation of continued growth took root, and eventually the market raced ahead of the economy, in spite of govern- ment warnings that brakes would have to be applied to bring inflation under control. Some people blame the ad- ministration for giving the im- pression that its anti-inflation plan would work quickly if not painlessly. But, until the end of March, it did seem that Ihe economy was heading in the right direction, with some in- dication that inflation was slowing down. The Federal Re- serve Boaid was loosening its monetary squeeze, and Presi- dent Nixon was bringing the troops home from Vietnam. Then came the news of the unexpectedly bean' fall in com- pany profits (13 per cent in the manufacturing industries) and new figures showed that infla- tion was in fact an bad as ever and running at an annual rate of 6 per cent. Wall Street was already wor- when President Nixon suddenly announced that he had ordered American troops into Cambodia. Prices plum- meted, and kept on going down as the government struggled to control the angry reaction that swept the country over Cam- bodia and the killing of four Ohio students. The administra- tion, as one broker put it, "looked like a rudderless ship." Technical factors helped to accelerate the fall on Wall Street. People who had bought on credit were forced to sell at a loss. At the same time, tlie big institutions unit trusts, p e n s i o u funds, endowment funds, etc. which now ac- count for up to 60 per cent of Ilie trading volume, stopped buying. Koine unit trusts sold holdings in order to meet ex- pected r c d e rn p ticns. Money moved increasingly into gov- ernment bonds, whose high in- terest rates had been attract- ing investors a w a y from equities for some time. Eu- ropean investors increased the flow of their money away from Wall Street. There are solid financial rea- sons for Wall Street's alarm at what appeared an extension of the waf in South-Cast Asia. Tlie market had been anticipat- ing a return to peacetime con- ditions and a fall in military expenditures as well as a re- duction in the space program. It expected more money to go into social programs and bought stock accordingly. The war was also seen as a cause inflation, and now seemed to be tearing the social fabric of the country apart. But there were other, more emotional pressures at work. Brokers saw student anti war demonstra- tions in Wall Street itself, fol- lowed by counter-demonstra- tions that brought angry, pa- triotic building workers into the street. But the overriding emotion was the fear that the adminis- tration had lost control and did not know what it was feeling not confined to Wall Street. Tie At the same time, Wall Street has the feeling that the admin- istration was not terribly inter- ested in what was happening to the market. There had been a lack of communication between the White House and the bro- kers as there had been with students, college presidents, the black community and with GRAHAM'S .dsSsJf "jPOTATOES Ontario fey. Mclntosh, Canada No. 1 LettUCe California, Canada Ho. 1 Pineapple PRICES EFFECTIVE Thurs., Fri., Sat. June 4, 5, 6. Ibs. bog 2 W VINE. RIPENED CAflFORNiA TOMATOES 33' CANADA NO. 1 !b. 51 GRAPEFRUIT JUICE ASSTD, PEAS SARDINES 5 5 tSmifcrillht? BRUNSWICK, Ws tins V for %F CATSUP 3 Vn n AYLMER 18-or. bottles DANISH BACON Iowllbli, Weekend Meat Values! WIFNFIH If VacPak......Mb. cello Side Bacon Garlic or Bslgna Rings PRIME RIB ROASTS SHREDDED WHEAT NABISCO. n 15-oz. plcg fc for PICKLES HEINZ, BREAD ond BUTTER 15-or. far SANDWICH SPREAD LUNCHEON MEAT RED OR BLUE BRAND BEEF 49C 69c 59c 69c SHOULDER OF LAMB......................... ,h. 39c SAUSAGE IARGE JUBIIEE PORK PORK PiCNKS BACON BY THE PIECE PORK PICNICS SMOKED BEEF UVER BOLOGNA 49c GRAHAM'S FOOD MARKET 708 3rd Avenue South PHONE AND SAVE FREE DEtlVERY GROCERIES 327-5434, 327-5431 MiATS 327-1312 OPEN THURSDAY TIU 9 P.M. of Ihc Cabinet however. I h e Konic itself. Essentially, market rallied without any help from the administration. No one seriously believed that Wall Street was in another 18211 crash situation, and, by last Wednesday morning, people be- gan to realize that prices had fallen too far. There were blue chip bargains to he picked up. Big institutions, which had been holding back, began buy- ing again. People who had heen juggling with borrowed shares and speculating "short" on a continued fall also rushed in to buy, as soon as prices began to improve. The emotional response of re- cent w e e k s appear to have calmed, and most people now expect Wall Street to take a cooler look at itself and at the economy. But there is still deep concern about the American economic situation and confu- sion over government policy. Mr. Monte Gordon of Bache and Company said; "The ad- ministration is talking about .a turn up in the second half of the year, but this is less and less certain. "Inflation is as high now. it not higher, than when the anti- inflation program began. Now there is talk of other measures: credit controls, taxation, prices and incomes policy. What the Street would press for is a def- initive statement about what is happening right now and what policies are to lace this situa- tion." Officially, the government an- swer is to stick to its original plan. But it is coming under increasing pressure to do some- thing more. With the budget sliding however slightly into deficit, there is a growing feel- ing that monetary policy alone the resulting exceptional- ly high interest, rates is being expected to do too much. There are further inflation- ary pressures in the offing. Some five million workers will be affected by new wage con- tracts that must be negotiated in the coming months. The Uni- ted Auto Workers, for instance, have contracts with the "Big Three" American motor com- panies, which expire in Sep- tember. The union leaders have made it clear that falling prof- its hi the motor industry will not stop them pressing for sub- stantial wage increases and improved fringe benefits. Wore and more voices are urging the administration to in- troduce some form of a prices and incomes policy, even if this does run counter to the whole E e p u b I i can philosophy. The OECD last week recommended the introduction of formal wage and price guidelines. The sober, unemotional Pierre Paul Sch- weitzer, head of the Interna- tional Monetary Fund, unex- pectedly prodded the adminis- tration in the same direction and Mr. Arthur Burns, chair- man of tlie American Federal Reserve, and until last Febru- ary Mr. Nixon's personal econ- omic adviser, caused consider- able surprise when he joined the chorus. To some this sounded like heresy, and the omnicompetent Attorney General. Mr. John Mitchell generally considered the second most powerful man in the administration, dismiss- ed the idea out of hand. "You can forget he snapped. There is a lot of argument about what an incomes policy means, and about whether it would work anyway in a huge country h'ke the United States. There is also a great concern about the timing of any new measures. Unemployment has already reached 4.8 per cent, and this may not appeal- disastrous taking t h e country as a whole, it tends to be espe- cially high in urban ar'eas with a large proportion of unskilled, poorly educated and thai usually means There have already been warn- ing signals of racial trouble, especially in Ihe South, and any worsening of the employment situation would seem hound to heighten the danger of a hot summer something this di- vided, unhappy country could do without. This is just one of the ele- ments in a complex economic, political and social equation which the administration must weigh in deciding at what point lo reflate the economy. Mr. Nixon needs to be able lo re- port good economic news as u'ell as glad tidings from Cam- hcdia and Vietnam, if he is lo pet. the Republican majority in Congress he hopes the Novem- ber elections will bring him. (Written (or The Herald and Tlie Observer, London] They Say Operators in the underworld, assisted by astute advisers, know to expand a loophole to the size of a canyon. Sandoval, head of the Small Business Admin- istration, 4AU3B III Stronger Voice From Prairies Ily Fulgcntc t'liiirpciiticr in Ottawa Lc Droll rPHE throe western provinces arc not happy with their fate. They complain that the easterners have had ad- vantages to their detriment Such was the theme of the recent One Prairie Province conference in Lctbbridge, which brought together representatives of Manitoba. Saskatchewan and Alberta It is clear that discontent is general on the Prairies, directed against the predomi- nance in Confederation of the old prov- inces of Ontario and Quebec. These dictate their wishes lo the fed- eral government on fiscal, industrial and political matters. The great business enter- prises have their head offices in Montreal and Toronto. The decisions and the direc- tives have come from the East since 13G7. Yet the situation has evolved over the last century. Colossal natural resources have been brought lo light in the West and the moment would seem to have come to change our now-obsolete structures Two theses are offered lor the Prairies to have a tetter chance to make themselves heard in the councils of the nation: the ad- ministrative fusion of the three western provinces, or a choice favorable lo a larger decentralization, to a certain self- determination, without excluding, as a last resort, separation which would be equiva- lent to throwing them into the arms of the Americans. For the moment, it seems that the idea of amalgamating the three sister-provinces has been clin.iiiated in favor of a tripartite economic council whose voice will have greater resonance. The idea of separatism is eliminated straightaway. Tln-rc exists in these regions of scattered populations of various origins a lively feeling of belonging to Canada. Ow history, short as it may be, re- proaches us. For us (French Canadians'I the West is Vcrendryc. the coin-curs des hois, Father Lacombc, Louis Hid, the In- dians, the bison, the cowboys, and the sur- vival of our own in this agglomeration ot British and foreign elements. Behind this background of folklore bursts an immense economic growth which marches in step with the industrial devel- opment of Quebec and Ontario A meeting such as that in Lelhbridge re- calls that Quebec is not alone in calling fcr a revision of a constitution brought into the world when ox-carts still furrowed tire western plains where oil kings now drive in Cadillacs. The constitution has become too narrow, too cramped; it has become awkward. And Ontario, Quebec and the Maritimes know this malaise well. The Prairies no longer wish to be the last little laggaids in the trail of the strong. But they do not refuse to talk. In presenting a common front around the table of the next federal provincial con- ference, it is certain that tliey will obtain a better hearing. Costs Of Education Still Rising From The Winnipeg Free Press 'THE most recent study by the Economic Council of Canada on enrolment in ed- ucational institutions in this country gives little encouragement to taxpayers who may have been hoping that the spiral of educa- tion costs was rearing an end. The latest figures, which project enrolments to the 1980-81 academic year, indicate that costs in most areas will continue to rise. Particularly is tliis so at the post-second- ary school level. In addition to an increas- ing number of students who will enrol in community colleges and technical schools, the council projects a fantastic increase in full-lime university 000 in 1368-69 to ill J980-81. Part of the reason is that the bulge in enrolment dining this period will have pass- ed the high school stage: but also contri- buting to the situation will be the fact that a larger percentage of young people will go on to take university degrees. The council suggests that hy 1950 it will be as common for students to continue to university and community colleges as It was in 1950 to attend high school. It is es- timated that over-all post secondary full- time enrolment (community colleges, tech- nical schools and universities) will virtual- ly triple by the early 1080s-from lo 1.1 million. Also contributing to increased costs will be s rise in secondary school enrolment, though I his will be less about 25 per cent above Hie 1967-63 level The only area in which there will be a decline in enrolment will be in elementary educa- tion. This is projected at 3.8 million by 1930- ten per cent below the 1967-63 level of 4.1 million. It is only at this point that the spiral of education costs shows signs of coming to an end. Elementary school enrolment is al- ready reflecting the lower birth-rate of tha 1960s, but secondary school enrolment will not begin lo reflect this until about 1975, and post-secondary school enrolment will show no sign of easing until the mid-1980s. By then it is estimated that the rate o! growth at the post-secondary level, now standing at about 15 per cent per annum, will have declined to less than five per cent. But it will not be until the late 1980s that there will be a real levelling off or de- cline. All this, of course, Is dependent on no new factors entering the situation. If cer- tain developments take place, such as tha granting of free university tuition, enrol- ment figures would have to be estimated upward, and the cost to the taxpayer would be considerably more. The picture for His next decade is thus both discouraging and encouraging: discouraging in terms of pro- jected costs, encouraging as an indication of a better educated populace. But two tilings are obvious: Only an economically sound Canada can provide the education lhat will be demanded and the individual taxpayer during this period must be pre- pared to pay ever-higher education costs. IVo Wonder Confusion From The Financial Post 'PC judge hy the immense alacrity with which various Canadian governments are moving 'to curb pollution, the preserva- tion of our environment is obviously an idea whose time has come. It may be. how- ever, that the issue of industrial pollution will be brought to a. head more rapidly hy insurance companies than by public pres- sure and politicians eager to ride the wave. Some influential insurers have annoiuiced that coverage for claims arising out of cer- tain of pollution will be excluded from general liability insurance policies. Considered against the background of the heavy damage caused in various parts of the world by escaping oil. and the recent S1CO million damage suit filed against Dow Chemical Co. of Canada for allegedly pol- luting Lake Erie with mercury compounds, this type of exclusion could leave many in- dustries exposed to huge liability claims with no insurance. Charles K. Cox, president o( Co. of North America, makes it clear what insurers are thinking. He says his company will continue to cover pollution which re- sults from an accidental discharge of efflu- ents (except for but it "will no longer insure the company which knowingly dumps its wastes." Such a stand will no doubt he an effec- tive spur to many industries lo reassess what they are doing in the ordinary course of produciJci! to contaminate their surround- that would be all to the good. This move by the insurers, however, raises several exceedingly pertinent ques- tions. What, for instance, does government consider acceptable levels of waste dis- charge for every type of industry? Is this, if ascertainable, the same idea of pollution held by the insurers? One special irony in tire present rush of governments to attack pollution and the rush of the insurers to gel out of insuring against pollution is1 this: Many government as the Ontario Energy Act certain types of companies to carry broad liability insurance designed to protect against pollution claims. Obviously there is an urgent need to bring together insurers, industry and gov- ernment to decide what is pollution. Only in this way will sensible ground rules, includ- ing those for insurance, be worked out. Certainly the need [or quite far-reaching legislation to avoid an increasingly contam- inated environment is necessary, but it should also be recognized that as long as there are human beings breathing and working there can be no such thing as s pollution-free world. What price, in short, are we prepared to pay for what degree of cleanliness? Since the taxpaying goods buying public and our governments have not really made this clear, no wonder the insurers are getting out, from under. Protection For Spouses By tlong Walker of Hie lathes in Hie community think it i.s dreadful the way I poke fun at. my wife. One lady even told me that .'he would rfioot me if she were Ihe men can get after Margaret Luckhurtl. for her ribbing of husband Bill about liis pack rat instincts. And she did it in s feature story not just an incon- spicuous lillle filler at Ihe bottom of column! Maybe a society should be formed for f.im protection of spom.es of people who easy access to print. Elspcth and Bill could be charter members and they iwght find some way of including Bob Anderson on an honorary basisl ;