Since February 1933, the general U. S. price level has risen 32%, cost of living 24%, prices of farm products 118%, wholesale prices 45%, Moody's index of spot prices of basic commodities 140%, prices of copper 188%, lead 115%, eggs 73%, flour 69%. Listing these figures and many others in the December Atlantic Monthly, Princeton Professor Edwin Walter Kemmerer commented: "That is inflation." Economist Kemmerer expects commodity prices to rise some 69% more and the cost of living to double. Nor is this a lone-wolf stand. Harvard's Professor Melvin Thomas Copeland made similar predictions last fall (TIME, Oct. 4). And 82% of the 2,560 ranking U. S. economists in the American Economic Association are on record that the present U. S. trend is toward dangerous inflation of money and credit.*
Back in 1933, in common with many another investor, a group of ultraconservative young men in Boston's Back Bay began to worry about possible inflation and how it would affect bond and stock values. After two years of quiet study, they decided that the only satisfactory hedge against inflation is commodities. Accordingly, in February 1935 they set up what they believe to be the first commodity investment trust in the world, called it Commodity Corp. Last week, after two years of "laboratory testing" in Boston, Commodity Corp. moved to Wall Street with assets of nearly half a million dollars in its coffers and big plans in its brief case.
Investment trusts of the run-of-the-mill variety are conspicuous enough to have SEC brewing plans to regulate them. Most consist simply of a pool of money kittied in by numerous individuals and invested in a broadly diversified number of stocks and bonds. Advantage for the individual is that his eggs are not all in one basket. Instead of putting his money on one or two stocks, he is banking on the combined action of a great number. Commodity Corp. uses the same procedure, but instead of buying stocks and bonds, it buys actual commodities or commodity future contracts. On December 31, 35% of its portfolio was in the warehouse, 65% in futures. It had future contracts to buy or sell in cocoa, copper, corn, cotton, hides, oats, rubber, sugar, wheat, wool and pepper. In the warehouse it held cocoa (179,482 lb.), lead (659,836 lb.), pepper (785,600 lb.), rubber (67,036 lb.), sugar (1,344,000 lb.), wool (51,751 lb.) and zinc (120,046 lb.). An investor who held 2% of Commodity Corp.'s outstanding shares on December 31 thus owned 2% less costs of each of these tangible properties, could sell out at liquidating value whenever he desired. If such a stockholder can find no buyer on the open market, Commodity Corp. is committed to buying back his shares. Major investing difference from a securities investment trust is that commodities do not pay dividends.