With renewed doubts as to the future course of the economy assailing investors and analysts, it seems worthwhile to review the progress which has been made by the railroad industry in the past five years. Admittedly, the improvement during this period has been partly cyclical. Nonetheless there appears to be substantial evidence to indicate that fundamental changes have occurred which will serve to offset in part, if not in large measure, any decline in general business activity. To maximize potential benefits marketwise of these changing fundamentals, the long term investor must be fully aware of these developments since rail equity prices still do not reflect in full the renaissance which has occurred in rail operations, finances, management and earning power. The most important of these developments can be examined in order of their relative importance to the investor.

Following a period of stormy economic weather during which the maladjustments of our long five-year business expansion will doubtless be corrected, the railroads should continue to enjoy a period of economic growth sufficient to sustain further worth-while advances in their equities, accompanied by rising price-earnings ratios—possibly sixteen times earnings as compared with twelve times current earnings for leading railroad equities—reflecting the improved fundamental position of the industry.