proposition of sales. The common hope is that after the loss there may be a big profit to make up for the loss. That is usually a delusion. The profit out of which the loss has to be taken must be found in the business preceding the cut. Any one who was foolish enough to regard the high profits of the boom period as permanent profits got into financial trouble when the drop came. However, there is a belief, and a very strong one, that business consists of a series of profits and losses, and good business is one in which the profits exceed the losses. Therefore some men reason that the best price to sell at is the highest price which may be had. That is supposed to be good business practice. Is it? We have not found it so.
We have found in buying materials that it is not worth while to buy for other than immediate needs. We buy only enough to fit into the plan of production, taking into consideration the state of transportation at the time. If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever. The carloads of raw materials would arrive on schedule and in the planned order and amounts, and go from the railway cars into production. That would save a great deal of money, for it would give a very rapid turnover and thus decrease the amount of money tied up in materials. With bad transportation one has to carry larger stocks. At the time of revaluing the inventory in 1921 the stock was unduly high because transportation had been so bad. But we learned long ago never to buy ahead for speculative purposes. When prices are going up it is considered good business to buy far ahead, and when prices are up to buy as little as possible. It needs no argument to demonstrate that, if you buy materials at ten cents a pound and the material goes later to twenty cents a pound you will have a distinct advantage over the man who is compelled to buy at twenty cents. But we have found that thus buying ahead does not pay. It is entering into a guessing contest. It is not business. If a man buys a large stock at ten cents, he is in a fine position as long as the other man is paying twenty cents. Then he later gets a chance to buy more of the material at