Wednesday, July 29, 1931: Dow 141.53 +1.89 (1.4%)

Assorted historical stuff:

US Steel announced first dividend cut since 1915, to a $4 annual rate from $7 previously. For Q2, Steel reported earnings of $7.391M or $.12/share vs. $3.02 in 1930; almost none of the quarter's profits were from operations. Directors also announced salary cuts for officers and white collar workers, indicating "question of reducing the wage scale in the plants will be decided shortly." Earnings this year look to be smallest in history of the company. Govt. officials reportedly discussed wages with a number of steel makers; officials made clear their view that wage cuts in a basic industry like steel might influence other industries, and they “are loathe to see this take place, but it was emphatically denied that any pressure had been brought to prevent it.” Officials denied knowledge of a report that Pres. Hoover had personally appealed to US Steel on wages. White House officials including Labor Sec. Doak denied any change in Administration policy on wages. Commerce Sec. Lamont, whose recent letter on the possible need for wage cuts had drawn much attention, was on vacation; officials made no attempt to explain the letter.

One man was killed and thousands endangered by an exploding oil tank that created a "lake of flames" within two blocks of the business district of Kilgore, Texas.

Dr. Nicholas M. Butler [philosopher, pres. of Columbia U. 1901-1945] says that unless postponement of war debt payments is quickly followed by progressive policies reconsidering “the whole present disastrous situation, conditions will be worse in June, 1932, than they were in June, 1931. There is no time to be lost.”

French Minister of War Maginot says France has reached limits of disarmament unless guarantee is granted at upcoming Geneva [disarmament] conference providing for mutual assistance through coalition of all forces against any aggressor.

Editorial warning that, while details of Mexico's new currency law (dropping the gold peso and adopting silver as the single currency standard) are as yet unclear, it's likely to be unsuccesful in its objectives of improving the price of silver or conserving Mexico's gold supply. Central Banking commission appointed in Mexico. Rate of exchange not yet determined for silver pesos; "quotation boards blank." Mexican press praises move abolishing gold as legal tender. NY bankers regard move as purely internal and without great significance outside Mexico.

The monsoon rainfall, because of its economic importance to India, is the subject of intense efforts at prediction. For the past 45 years, British meteorologists have attempted to predict the amount of rainfall; they have now reached a "fairly accurate" level, based on "weather observations in numerous distant regions."

A leader in the truck field is developing a new design of large motor bus featuring aluminum body construction that it claims will travel 70 mph.

Alaska leads the world in airfields per capita; with about 60,000 people and 65 airfields, it has an airfield for every 908 inhabitants.

Banks are heavy users of airmail in order to save interest. They generally want mail to be flown at night since checks can be then cleared in cities 1,200 miles away the next morning and mail can be moved between the coasts with a loss of only one business day. It's estimated airmail saves banks one to three day's interest on $10B a year.

General Iron Works of Cincinnati and Frigidaire are now marketing a unit that can provide comfortable temperatures for the small home in both summer and winter; unit is called the Hot-Kold and is an "automatic gas-fired system of the forced air type."

New Zealand govt. has prohibited all forms of trading stamps and gift coupons, including cigarette coupons, as "uneconomic."

The London Evening Standard reports US Shakespeare investigators are more original than British ones, who tend to concentrate on proving Shakespeare "did not write his own works." One Illinois professor has spent years researching Shakespeare's income, and found that in his best years it averaged about 250 pounds sterling ($1,250). This isn't as pitiful as it sounds, since it would be about $10,000 in 1931 dollars.

Germany special:

Germany postpones reopening of banks to Monday, though amounts permitted for withdrawal were increased to allow for rent and interest payments. Delay was attributed to concern that month-end payments might cause new run, and to desire to finish negotiating maintenance of foreign credits in order to avoid keeping a moratorium on foreign payments. Second objective will be difficult due to large number of small creditors. Private German banks will establish new institutions to give credits against securities (for small bankers with no assets except securities) and to liquidate assets of savings banks. Savings bank illiquidity seen possibly necessitating 1B mark credit from the Reichsbank before bank reopening; total savings balances amount to 12B. German govt. issues new emergency decree in effort to determine extent of Germany's foreign debts; all people and cos. owing more than $12,000 to foreign creditors must report full total within 10 days.

Collapse of Nordwolle, Germany's largest woolen yarn and fabric plant, which came at height of the recent crisis and caused "a sensation in the banking world here and abroad," attributed to speculation in wool prices by the Lahusen brothers using a Dutch subsidiary apparently unknown to Nordwolle's board of directors.

British Premier MacDonald and Foreign Sec. Henderson met with German officials in Berlin.

Foreign currency market was “at a complete standstill” pending definite news on the proposed French loan to the Bank of England; the Bank continued to lose gold, but at a slower pace. Reports from Paris and London on the loan were conflicting. It appears that French bankers are prepared to offer the loan, but reports from London indicate it's unpopular in banking circles there and the British Treasury has failed to approve it; it's believed the Bank of England can overcome the crisis through regular banking measures, and accepting the loan might “reflect on the standing” of the Bank. However, with French banks still in a “jumpy” state, it's believed there's danger of the gold drain resuming if the loan falls through. French financial circles are critical of Bank of England Gov. M. Norman, blaming him for scuttling the previously proposed French loan to Germany; on the other hand, British bankers are giving “much unfavorable criticism” of the “hasty French attacks on sterling,” contrasting it with restraint shown by NY banks.

Sec. of State Stimson calls for complete change of national psychology in Germany if the country is to recover from its economic ills. Stimson "pointed out that any nation which has fallen into the habit of excessive complaining naturally finds it difficult to reverse its methods ... It is difficult to persuade a man to lend money to another man or a nation which continually says it is broke, was the thought Mr. Stimson brought home." However, feels German themselves are realizing "that although the crisis is not over, conditions are considerably bettered already." Stimson will now go to Scotland for a few days of hunting and fishing, after which he will spend two or three weeks in Europe before returning to the US.

Editorial on Dr. H. Schacht's (former Reichsbank pres.) recent book on the "reparations muddle"; "for all his national and personal bias," the book "throws a bright light upon a German financial situation which still, under the surface, defies the glowing urbanity of half a dozen mobile premiers and secretaries of state." Dr. Schacht's argument that Germany has been paying reparations by borrowing isn't exactly news, but, while criticizing govt. extravagance, he shows almost conclusively that this foreign borrowing was Germany's only choice. Dr. Schacht estimates total value of German reparations payments at 88B marks, or 220 percent of peacetime "annual national income" (he contrasts this with the milder reparations assessed by the Germans against the French in 1871 of about 25% of national income; in addition, he appraises value of lost colonies at 80B-100B marks). With Germany almost stripped of convertible capital and running large balance of payment deficits, foreign borrowing was inevitable; much was short-term, which is "notoriously sensitive to ... instability." It's hard to avoid concluding that a large part of remaining reparations claims are worthless. It's therefore unfortunate that at least some at the London conference "were instructed not to go into the one question which must be answered before Germany, or Europe, can again get its feet on solid ground." Asst. Commerce Sec. Klein said US entered no "political engagements" in offering Germany relief but simply acted in "vital interest of our people as producers and as investors."

Market commentary:

Market wrap: Stocks "meandered along in an aimless way in another apathetic session and volume was at the lowest proportions"; "the entire Street was waiting for the result of the meeting of US Steel directors" (released after the NYSE close). Prices opened irregularly, fell a little and were heavy around noon, then "gradually crept back" and displayed a firmer tone in the afternoon. Bond trading unusually dull, but showed reversal of recent trends. German issues rallied sharply on reports banks would reopen shortly; most European and S. American issues also rose substantially though Chilean bonds were irregular. Domestic list very quiet; highest-grade issues steady while second-grade and speculative sagged. Commodities weak; grains lower, with Sept. (50 1/4 cents/bushel) and Dec. (54 1/4) wheat dropping to lowest levels in CBOT history and corn down sharply; cotton down sharply to only slightly above season lows hit in early June. Copper remained at 7 3/4 - 8 cents with buying somewhat better.

Trading on San Francisco Exchanges turned down sharply after announcement of the US Steel dividend cut. Over-the-counter securities also broke sharply in the final hour of trading after the announcement; bank and trust stocks were heavily pressured.

Street sentiment was pessimistic after the US Steel announcement, since new rate of $5 had been anticipated. Conservative observers advised clients to "wait for a good-sized reaction" before gradually buying stocks.

Retail chains drew some buying, with J.C. Penney and Safeway particularly strong. A large short interest reportedly exists in steel shares. Rails were irregular, with NY Central selling off in response to estimate of sharply lower share earnings.

American Can has been sold by interests who claim this year's earnings won't match those in 1930 as expected; however, the stock has drawn good support on reactions. McKeesport Tin Plate is likewise subject of downward estimate revisions on lower canning activity. National Biscuit has drawn some concern on possible overexpansion and problems coordinating new divisions; it's made some important executive changes in the last few months. American Tobacco continues to be well supported when selling appears; recent cigarette price increase believed beneficial; many important brokers have recently recommended the stock, bringing in some public buying. B.F. Goodrich operations have reportedly improved in recent months; first half results are expected to be considerably better than in 1930, showing an operating profit before inventory adjustments. Loews has drawn buying in anticipation of good earnings report; seen as most successful of the amusement cos. Bigelow-Sanford Carpet rose to a yearly high following surprisingly favorable first half earnings of $1.91/share vs. $1.41 in first half 1930 and a sizable loss in second half 1930. However, at about 30, the stock was still selling only a point or two above net quick assets.

Brokers again complain of lack of business as customers remain on sidelines. However, leading brokers also report that the public bought considerable stock when the market was strong in Feb., and many have continued to hold stocks since; this has raised fears of renewed liquidation "if conditions are disturbed seriously." No evidence recently seen of "bank sponsorship" of stocks; many observers don't expect this "until a definite change comes in domestic and foreign conditions. In recent weeks, the leading bankers of the world have been giving most of their attention to the affairs of Germany."

Municipal bond dealers believe very light volume of offerings in recent week has given "market an opportunity to digest" and put it in good position to absorb upcoming offerings; remaining supply on dealers shelves is believed very low, not exceeding $50M.

Street sentiment improved regarding the foreign situation thanks to slowing of British gold drain; little news came from Germany, "but in this instance no news was regarded as good news" and it's believed "German bankers now cooperating ... will work their way out of the present situation."

Economic news and individual company reports:

Fed. Reserve member banks weekly report showed loans and investments fell to a new yearly low; "this continued contraction of bank credit ... clearly indicates that deflation is still the order of the day, despite Fed. Reserve efforts to stop the movement."

Texas House investigation of oil industry likely to conclude Wednesday, but "the mass of testimony introduced ... differs so widely in many of its essential statements and the recommendations of the witnesses are so lacking in uniformity that the Legislature is confronted with the problem of what kind of laws to enact ..." Oklahoma City report says Gov. Murray has threatened to shut down all wells in the state except stripper [small] wells unless price reaches $1/barrel by Saturday; order is to be enforced by military police. Refineries ran at 69.0% in week ended July 25 vs. 67.8% prev. week; stocks of gasoline fell 88,000 barrels to 37.289M. Crude oil production in week was 2.487M barrels/day, up 40,150 from prev. week and about the same as a year ago; increase due to East Texas area, which rose 96,100 barrels/day to a new high of 504,900.

Northwest crops suffered severe crop damage due to heat wave and drought; numerous spots in the Dakotas and Minnesota reported temperatures over 100 degrees. Plains states and central valley also need rain. Nebraska and Western Iowa badly infested with grasshoppers; extent of damage to grain unclear. Canadian govt. reports disastrous weather week for Western crops, with high temperatures, hot winds and almost no rain.

Bill introduced in Texas Legislature to reduce 1932 cotton acreage 50% from 1931 to conserve soil.

NY Superintendent of Banks Broderick files list of claims received against the Bank of US; $131.0M in claims accepted and $117.6M rejected; over 270,000 claims examined since June 29; intends to apply for order authorizing initial payment of 30%; additional dividends to be paid as liquidation progresses.

First 71 rails report net operating income in June $45.7M, down 26.5% from 1930 and 51.6% from 1929; gross was $342.0M, down 16.3% and 29.9%. The same rails in May reported net of $38.7M, down 38.1% from 1920, and gross of $341.9M, down 21.3%. Rail freight loadings for week ended July 18 were 757,555, down 6,026 from prev. week, down 18.3% from 1930 week, and down 29.8% from 1929.

Extremely detailed editorial by T. Woodlock on costs for delivering electricity to home consumers; argues utilities make little profit on those who use less than the average annual US consumption of 550 KWHr, but have much lower costs per KWHr to supply larger consumers; "thus the facts point to a relatively high minimum charge for small consumption and a rapidly decreasing charge for increasing consumption as the proper method of making rates for this class of service."

Some difference of opinion emerges regarding $10M Newfoundland loan reportedly arranged by "Miss Jeanette Lewis." Newfoundland govt. says has received no direct offer. Lewis replies no direct offer has been made but money ready to go; "the capital was at the disposal, subject to certain terms, of the Premier and his govt. at any time they chose to take it up."

US investment in Chile estimated at $700M, of which $300M is in bonds held by US investors. Chilean revolution marks end to proposed economic conference of American republics excluding the US that deposed Pres. Ibanez had championed. Conferences of European and Chilean nitrate producers on control of production were resumed.

New Canadian bond offerings for year to July 20 were $965.4M vs. $427.5M in first 7 mos. of 1930 and $385.6M in 1929.

Analysis of low-priced car price trends since July 1930 reveals costs per pound have declined 2 1/2% - 8 1/2%; the dollar price per car has been declining and pounds per car rising. Variation in price per pound between the three leading companies is lower than a year ago. Companies also have increased value of cars through intangibles including more dependable parts, rustproofing, "free-wheeling," better paint jobs, more attractive interiors, etc.

Survey of factory wages in NY State finds average hourly wages for: engineer - 95 cents; skilled worker - 78 cents; truck driver - 69 cents; machine operator - 60 1/2 cents; laborer - 51 cents.

Paramount-Publix plans to start production on 22 new talking films in the next 70 days; to break ground on two new sound stages totalling 37,500 sq ft.

Earnings reports: US Steel Q2 $.12/share vs. $3.02; half $.17 vs. $6.46. Youngstown Sheet & Tube Q2 ($.91)/share vs. $2.17; half ($1.53) vs. $4.09. Foster Wheeler half $.03 vs. $4.27. Middle West Utilities year ended June $1.40 vs. $1.48. Norfolk & Western Rwy. half $6.14 vs. $10.15. Consolidated Cigar Q2 $1.59/share vs. $1.41; half $2.63 vs. $2.48. Curtis Publishing Q2 $.83/share vs. $2.32; half $2.54 vs. $5.07.

Companies reporting decent earnings: Middle West Utilities, Sherwin-Williams, Consolidated Cigar.

Movies:

The Common Law - RKO-Pathe film, at the Mayfair. Joel McCrea "as John Neville, a young American artist living in Paris, is assigned the task of making us believe he is shocked when he learns that the beautiful model whom he has employed, and with whom he has fallen in love, had an affair with another man before she came to work for him." Revelation causes bitter anguish; he parts with the girl but meets her again at a party; she persuades him she loves him, and "will live with him, unmarried, until they are both sure their love will endure despite the social barrier that separates them." On returning to the US, "marriage presents itself to them as the only way out when the two ... join his family's social circle ... they are heading for the nearest Justice of the Peace as the film ends." Considering weakness of the story, cast does rather well; "they manage to go through the necessary motions and to read the naive lines without actually boring their audience."

The Magnificent Lie - Paramount film. Cabaret singer, Poll, as a practical joke, impersonates old flame of an ex-soldier, Bill, who has gone blind, but then falls in love with him. When she finally reveals the truth, Bill is "naturally angry." However, as Poll is driving him home, she crashes the car into a ditch, which fortuitously restores Bill's eyesight. "The sight of the face of the girl ... is so pleasing that he changes his mind about bidding her a final farewell." Main deficiency of film is "failure to amalgamate successfully the elements of pathos and comedy in the story." However, film is a good vehicle for Ruth Chatterton and Ralph Bellamy is "quite believable as the afflicted hero."

Joke:

Farmer 1 - Did you hear the bones of some old prehistoric man were found on old Nicky Coombes' farm? Farmer 2 - Poor old Nicky - but chances are, he'll be able to clear himself at the inquest.

Tuesday, July 28, 1931: Dow 139.64 +1.40 (1.0%)

Assorted historical stuff:

In the first statement from the Administration that acknowledged wage cuts might be needed due to the prolonged depression, Commerce Sec. Lamont said many corporations without strong reserves now are in the difficult position of having to cut dividends, salaries and wages. In letter declining Presidential intervention in Rhode Island textile strike, Lamont noted "marvelous" success of 1929 conference in maintaining wages up to now in spite of the fact that, contrary to Washington belief, industries had made no binding commitments to do so. He went on to say "no one could have done more to maintain wage rates" than Pres. Hoover, and expressed great regret that corporations are now compelled to cut wages, "but I do not believe it is the duty of the govt. to interfere ... neither do I think such interference would be effective." A govt. economist noted that, even if general wage cuts were now approved by the govt., judging by past depressions the reduction in wages wouldn't approach that in living costs.

Henry Ford says most important factors to economic recovery are working and thinking. When asked about possibility of upturn in spring or sooner, replied neither he nor anyone else knew anything about that. Condemned speculation, saying it led to inflation and subsequent depression. Admitted factory at Dearborn was operating about 50%, but declined to say if this was an increase or decrease over previous months.

Editorial by T. Woodlock agreeing with a reader's interesting suggestion that German debts be adjusted for prices (downward if price deflation occurs, upward if inflation does); if this isn't done "and prices continue to fall, a fresh 'crisis' infallibly will arrive. 'Fair' or 'unfair,' that is the inescapable logic of the facts. The 'price-equation' is at the bottom of the entire trouble of the world's finance. A change in that equation has 'frozen' a great mass of bank-credit in all countries and generated in it a large loss ... The all-important thing is to hold the banking structure intact while that loss is being distributed."

Revolt reported in Chile; deposed President Carlos Ibanez, "his strong rule ... broken by a popular uprising," left the country. The US ambassador said there were large crowds in the streets but no particular disorders and that no US citizens or interests had been harmed. The president of the Senate was reportedly acting as President of Chile. Banks were closed from July 27-30 and "a four-day moratorium on commerce effected."

Brazilian govt. reportedly agreed to all recommendations for stabilizing their finances made by Sir Otto Niemeyer of the Bank of England; this was seen likely to "exert a steadying influence" on the country's outstanding securities.

Editorial noting threat from the "militant Attorney General" of Texas to put the San Antonio Public Service Co. into bankruptcy for the offense of selling appliances including "bottle warmers and ... washing machines to unsuspecting females." Judging by a call from the editor of the Texas Weekly for a more business-friendly environment in Texas, "Attorney General Allred will not be wholly without honor in his own country if he calls off his receivers and allows the San Antonio company to surrender its curling irons but to keep its charter and business."

Yet another Farm Board editorial, this one rather humorously calling on the Board to join the Native Americans in Saskatchewan who recently successfully held a rain dance. "The Farm Board was organized ... to give agricultural 'relief'; what greater relief could it give than rain in those parched areas? ... All other means ... have failed, some even were proven failures before the Board tried them, but the rain dance remains officially untried. Why doubt its efficacy? From the land of the Sioux and the Saskatchewans down to the Southwest, where the Hopi ... rake up a few bushels of rattle snakes to add fervor to the ceremony, the rain dance has been held" for time immemorial. "If it did not produce results, how could it have survived through all the centuries?"

Since flying has become commonplace in recent years, weather services have started reporting visibility. This is recorded on a scale of 1 (objects invisible at distance of 1/8 mile, reported as "no visibility") to 10 (objects visible at 10 miles, "unlimited visibility").

The New Yorker Hotel reports that during an 8-month period it found over $20,000 in cash in the pockets of 125,000 guest trousers delivered to the valet shop.

First winter fashion openings in Paris indicate big woolen season; all houses so far feature "thick wool dresses and thicker wool coats."

The miniature golf craze that swept the country last year has given way to two new fads - the golf driving range and the archery target range.

Architects of recent skyscrapers have borrowed the ensemble idea from fashion designers, "to the extent that the modern skyscraper, from jutting gargoyles to telephone booths, is a unit in appearance." One of the newest buildings carries this to an extreme. In a reception room sits an efficient-looking gentleman answering the telephone; when he leans back in his swivel chair, a replica of the building is clearly visible on his socks.

Market commentary:

Market wrap: Stock trading continued "lethargic" trend of last week. Opening was lower, but the general list firmed gradually through most of the session, ending at the day's best levels. However, some leading rails fell and Auburn Automobile plunged over 10 points. Bond trading very quiet, with price trends mixed. Foreign list featured sharp movements in some S. American issues; Chilean bonds fell on reports of revolt while Argentine issues firmed. Trading in German issues was light, with price changes mixed. Domestic issues generally steady, with price changes fractional. Commodities steadied after early declines; corn ended higher while wheat, other grains and cotton finished moderately lower. Copper continued at 7 3/4 - 8 cents with buying small; consumers are covered for the next 4 - 5 months and appear to be waiting for clearer business picture before buying; production continues higher than consumption and current record low price may not hold. Silver up 1/2 cent to 27 7/8.

NYSE volume of 600,000 was lowest since Oct. 1924.

Some heartening signs of improvement seen in several industries including textiles (particularly wool), sugar, and oil; stocks in these lines have drawn buying.

American Woolen preferred was up sharply based on improvement in the wool markets and reports "Paris has decreed woolen clothing for women this fall and winter, even to evening wraps and hats"; even more encouragingly, "the trend in garments is toward longer and fuller dresses." Coca-Cola has been doing better recently; sales in June were particularly good due to hot weather, though sales in earlier months were probably slightly behind 1930; Q2 net expected to show gain over 1930. Allied Chemical fell on reported failure of talks to reconstitute nitrate cartel. Loose-Wiles, "the country's second-largest cracker concern, is making a good showing in this uncertain year." Chrysler has almost doubled from its 1931 low of 12 1/2 on optimism regarding its new line of low-priced Plymouth cars. Nat'l Steel likely only major steel co. to cover dividend in first half, thanks to strategic plant locations, diversified output and decentralized organization.

"The rank and file of the Street" are largely standing aside from trading; some seem disposed to await market reaction to the US Steel dividend decision.

A favorable factor for market sentiment has been better than expected Q2 earnings reports; a group of leading companies in basic industries generally showed improvement in earnings from Q1. Also encouraging was a “rather unusual turn for the better during the week ended July 18.”

While some Q2 earnings reports have been better than the bears anticipated, statisticians are carefully examining reports of some companies that show dividends "earned" through dubious tactics such as cutting allowances for depreciation.

J. Post, Nat'l Sugar Refining pres., says Chadbourne sugar plan has been successful so far; expects recent rise in sugar prices to hold. Russia seen likely to join Chadbourne sugar stabilization plan.

Harvard Economic Society sees slight upturn in commodity prices during July, following decline of over 28% since July 1929; expects upturn in BLS commodity index this month; this rise comes "at a time when business volumes have given evidences of recovery." Also sees possible positive in moratorium on intergovt. debts; if this relieves pressure on foreign currencies, "stabilization of commodity prices would be almost assured."

Inventories are generally "at a low ebb. The whole country is largely on a hand-to-mouth basis, and only necessary replacements are being made. This has created a healthy trade situation, although a very dull one." While this dullness may continue for some time, "sooner or later there is going to be some active buying."

Asst. Commerce Sec. Klein says US now witnessing last stages of the depression; low point in business reached last spring.

R. Stephenson, Amer. Bankers' Assoc. pres., says business conditions present most optimistic outlook since 1929 market crash; settlement of European debt problem will help world trade; transportation to be regulated; increased freight car loadings a sure index of returning prosperity; “gloom” atmosphere of New York, which has radiated to rest of the country, is being dispelled by improved employment conditions.

Germany special:

Considerable interest aroused by reports from Paris that Bank of France together with leading French banks were arranging 20M pound loan to Bank of England to support sterling. Prolonged conversations reported between Bank of England dir. R. Kindersley and Bank of France Gov. C. Moret. Montagu Norman, Bank of England pres., has apparently withdrawn his previously consistent opposition to aid from Bank of France as result of current conditions. NY bankers are split on whether the loan is needed, since gold drain appears to be ending. British gold losses eased to 1.9M pounds sterling, bringing holdings to about 135.7M; slowdown in losses improved sentiment; foreign exchange circles believe gold losses are gradually ending and danger of Bank of England being forced to raise rate to 5% has passed. French bankers are concerned that accumulation of gold in France may lead to inflation; on basis of current gold holdings, currency in circulation could be doubled.

Heavy British gold losses attributed first to German banks unable to export money to settle obligations drawing down balances in London, and then to scare in which French private banks withdrew balances, reportedly becoming nervous after warning by Sir Arthur Henderson that a moratorium at Berlin would be followed by one at London; “it is understood that the Bank of France did not sell a single pound ... and urged that the private banks cease withdrawing funds from London.”

Restriction on bank payments within Germany will reportedly be lifted Wed., making monetary movement within the country completely free; restrictions on foreign currency movements will remain at least until extension of foreign short-term credits is negotiated. Reichsbank officials not concerned with likely large increase in currency circulation causing price inflation since currency will largely be hoarded rather than used; believe further increase in discount rate (now 10%) not needed; private banks now charging average of 15% on loans. A German acceptance bank has been formed with combined capital of 200M marks from the Reichsbank and private banks; it will stand ready to buy acceptances (bills) from any bank in difficulties, since it's recognized closing of another large bank would have “dire consequences for the entire banking structure.”

Economic news and individual company reports:

Fed. Reserve reports industrial production fell more than seasonally in June; factory employment fell 3% and payrolls 6% between mid-May and mid-June; wholesale prices, which fell until the end of May, rose during June but mostly declined again in first half of July; textiles and shoes continued to be bright spots.

Texas House oil industry investigation hears testimony from W. Farish, Humble Oil pres.; says Humble is currently losing $500,000/month; believes Texas 50% oversupplied with pipelines; wouldn't object to law requiring certificates of necessity to drill a new oil well or build a pipeline; favors modifying antitrust law to allow unit (cooperative) operation. Sinclair Oil raised buying price to 50 cents/barrel for Oklahoma-Kansas crude. Gasoline in Chicago wholesale market firmed to 3 - 3 1/8 cents/gallon

West Palm Beach city commission invites bondholders committee to further discussions. Coral Gables Citizens advisory committee approves plan of settlement reached by city commission with bondholders committee.

NY City net funded debt as of March 1 was $1.658B, or 8% of assessed real estate value; city is $321M below debt limit.

Commerce Dept. reports June factory sales of automobiles in the US 249,462 vs. 315,115 in May and 334,506 in June 1930; half 1.568M vs. 2.199M.

Rail union executives are meeting in Washington to discuss labor problems; unions are expected to support the 15% rail rate increase.

Complete strike against Paterson, NJ silk industry involving 20,000 workers believed possible this week.

Nitrate conference in Brussels ended without agreement on reconstituting a cartel.

Foreign govt. and corp. financing in the US during the first half was $574M vs. $839M in 1930, $720M in 1929, and $1.479B in 1928; so far this year there have been no European securities offered and over 90% of the total was Canadian.

Newfoundland received $10M loan through Montreal interests, running for 35 years at 5%. "Miss Jeanette M. Lewis," who arranged the loan, is involved in numerous mines in Quebec, Ontario, Newfoundland and Samoa; she achieved her first business success by convincing the Canadian Northern Rwys. of the feasability of a tunnel under Mount Royal. NY and British capitalists are reportedly ready to negotiate loans up to $100M for development of Newfoundland.

Mexico adopts law making "gold peso no longer ... usable for circulation"; foreign currency loans payable in Mexican silver coins; no restriction on import or export of gold coins; Bank of Mexico becomes central bank with powers similar to Fed. Reserve of the US. Mexico City Chamber of Commerce petitioned govt. for measures to alleviate the depression, including: substantial increase in import duties; Federal govt. ending imports of goods that can be made in Mexico; "ceasing parcelling out lands to peasants and affording guarantees to large and small rural proprietors"; and a more evenhanded govt. policy between industry and labor to replace "a bias in favor of the workman." Govt. newspaper characterized suggestions as reactionary.

French June imports were 3.194B francs and exports 2.513B, vs. 3.440B and 3.377B in 1930. For the first half, imports were 23.202B and exports 16.235B vs. 26.832B and 22.628B in 1930.

Latest British trade reports "extremely dismal"; unemployment up to 2.643M; Federation of British Industries watching for German dumping of inventories.

Canadian foreign trade in June was "exceptionally light" at $107.8M, largely due to lower commodity prices; this was down 37% from 1930, while trade in the three months ended June 30 was down 31%. Early returns from Canadian govt. sources indicate entrance of US tourists has reached record proportions so far this year; a larger percentage of long-stay permits is being issued.

Argentine imports fell over 25% in the first half vs. 1930, resulting in trade surplus of $28M.

Republican Senate leader Watson says party opposes any tinkering with tariff in next Congress; content with revision by Tariff Commission.

US Shipping Board reports Baltimore was second to NY in volume of foreign shipping during 1930, outstripping New Orleans for second time in history.

NY State motor fuel tax netted over $30M for fiscal year ended June 30, up about $5.3M from prev. year.

Earnings reports: J.C. Penney half $1.46 vs. $1.14. Peoples Drug Stores half $1.37 vs. $1.17. Bangor & Aroostook RR half $4.56 vs. $8.31. Virginian Rwy. half $1.44 vs. $3.95. General Refractories Q2 $.12/share vs. $2.07; half $1.02 vs. $4.60. Consol. Chemical Indus. Q2 $.43/share vs. $.66; half $.84 vs. $1.12. Congress Cigar Q2 $.37/share vs. $1.11; half $1.00 vs. $1.87.

Companies reporting decent earnings: J.C. Penney, Peoples Drug Stores, National Distillers (medicinal whiskey).

Upcoming movies:

RKO - Law of the Night, a story of New York night courts. Warner Bros. - Larceny Lane, with James Cagney and Joan Blondell; The Road to Singapore, with William Powell; Five Star Final, with Edward G. Robinson; The Mad Genius, with John Barrymore. Elstree Studois - Alfred Hitchcock's Rich and Strange. Paramount - "picturization" of Dreiser's American Tragedy "is being withheld from showing pending important developments in the author's suit against Paramount, claiming the producers have turned his novel into a 'Hollywood version of a murder.' Sylvia Sidney is being replaced by Peggy Shannon in Working Girl, in order that she may start work at once on Ladies of the Big House.

Joke:

Mistress - Why did you leave your last place? Prospective Maid - They were too highbrow for me. They were always fighting and fussing, and I had to spend all day running from the keyhole to the dictionary.

Monday, July 27, 1931: Dow 138.24 -0.77 (0.6%)

Assorted historical stuff:

Pres. Hoover sends letter to heads of all govt. executive departments citing seriousness of US financial situation and anticipated large deficit for current fiscal year; suggests department heads refrain from committing money now available except where clearly necessary for public welfare. Washington opinion is that a savings of about $40M during the current fiscal year is about the best the Administration can hope for. Largest spending departments of the Federal govt. are Veterans Administration $729M; Dept. of War $478.4M; Navy $354M; Agriculture $296.8M; Farm Board $190M; Treasury $204.5M; Post Office $145M.

Editorial: Indications are multiplying that "faith in a pegged economy as a bridge over depression is on its way out" and that business thought is moving toward "wholesome realism." Men everywhere seem more disposed to "climb over obstacles in the path to recovery" rather than take "longer and more difficult detours around them. Abroad, a pretentious meeting of statesman" first ended in "disappointment over its apparent futility," but then brought "realization that it escaped the temptation to pile one house of cards upon another". At home, Pres. Hoover has "bluntly ordered" the govt's house be put in order; at the US Steel meeting tomorrow, directors will consider cutting the dividend and are then likely to move to wage cuts; these actions indicate "the growing necessity to face realities and to move courageously to meet them." If the moves by US Steel "permit a subsequent expansion of its output and labor employment, their action will be regarded as a harbinger of industrial reconstruction."

Many believe that when the rail rate question has been settled, the railroads may try to get further relief through readjustment of wage scales.

Wickersham Committee finds current US prison system antiquated and inefficient; doesn't reform the criminal but hardens him; "the millions of dollars now used to construct elaborate maximum-security prisons could, with much better advantage, be used in the development ... of adequate systems of probation and parole."

Argentine govt. has shut down five newspapers for "alleged publication of sensational reports concerning the political situation."

Cuban Federation of Labor orders general 24 hour strike Aug. 1 to protest arrests of several labor leaders; minor strikes already in progress.

Disturbances in Seville, Spain cause 26 deaths but are unsuccessful at aim of starting a general strike.

IT&T has invented a new recorder able to keep a complete record of long-distance telephone conversations on a magnetic steel wire.

Pullman intends to construct an experimental aluminum sleeping car; could save 30%-40% in weight over current steel cars.

Television development ahead of schedule. NBC has received permits for construction of television and sound station on 84th floor of Empire State building; the Columbia System recently opened station W2XAB, which will broadcast 7 hours/day; “while this of necessity is merely experimental, ultimately it is likely to be improved to the extent of broadcasting in color.” Some television sets on the market today are considered satisfactory, but leading radio cos. are working on improved models; it now seems several leaders will be ready to market sets by early 1933, by which time broadcasting experiments should be complete.

Commercial Solvents is working on development of synthetic plastics and resins through its Resinox division; Corn products has purchased an interest in Resinox as a possible outlet for corn sugar, one of the raw materials from which plastic can be made.

Summer stock gets a new meaning - even in these lean days, several brokerage firms have representatives who appear in the Social Register staying at leading seaside and mountain resorts throughout the East to drum up business.

Story quoting an affidavit from one Major James B. Merwin that relays remarks Lincoln made to him a few hours before his assassination: "Merwin, with the help of the people we have cleaned up a colossal job. Slavery is abolished ... the next great question will be the overthrow and abolition of the liquor traffic ... less than a quarter of a century ago, I predicted that the time would come when there would be neither a slave nor a drunkard in the land. I have lived to see, thank God, one of those prophecies fulfilled. I hope to see the other realized." [Note: Drys and wets have both claimed Lincoln as backer, drys apparently with more evidence.]

Market commentary:

Market wrap: Stocks moved lower through a dull Saturday session in spite of a rally in Berlin, as attention apparently turned to dividend uncertainties at important domestic cos. including US Steel and Bethlehem. Opening was weak; fractional recovery after first half-hour but trading turned increasingly dull; activity increased somewhat in final hour and leaders slightly extended declines. Bond trading also extremely sluggish; German issues fell to new low ground while rest of the foreign list was also soft. Some weakness extended to the domestic list, but highest-grade issues generally steady. Commodities weak; grains lower with season lows hit in corn; cotton down moderately in spite of unfavorable weather. Copper remained at 7 3/4 - 8 cents with buying small. Silver down 3/8 cent to 27 3/8.

Wall Street now seems generally convinced the US Steel dividend will be cut at the meeting tomorrow afternoon; up to a few days ago many were hoping the board would maintain the $7 annual rate "because of its effect on sentiment generally."

Stock market has been so dull in many recent sessions that both good news (better than expected earnings) and bad (continued uncertainty abroad and likely US Steel dividend cut) has been ignored in most cases.

Wall Street is now following the gold drain from England as much as the German fiscal situation. Sterling has firmed, and it's hoped continued strength will stop gold exports and prevent a need for further London rate increases. The Street "is cheered somewhat by the apparent cooperation of the German banks in the effort to help one another out of their difficulties" but "realizes that there is a long row to hoe before the situation in Germany can be considered much improved."

Somewhat complex technical analysis finds recent stock movements failed to break through important resistance levels on the upside, making [note: as usual] "the next week or so fraught with great importance." Breaking through July 15 resistance levels on the downside (about 138) would indicate general list is headed for a test of the June 2 bear market low (121.70). Failure of the latter to hold "would point to prolongation of the existing business depression."

Short interest reportedly is smaller than a few weeks ago due to covering during recent technical setbacks.

American Can has been weak on industry uncertainty; in past week, it's been announced that the California peach pack this year will be only 9M cases vs. 13M in 1930, and the US pea pack only 13M vs. 22.5M; observers say curtailment is more drastic than anticipated. Opinion is divided on the rumored Sears - Montgomery Ward merger; some observers believe the combined company couldn't maintain the current sales volume each has separately; many customers who prefer to deal exclusively with one or the other might be lost following the merger.

In spite of continued weakness in commodity prices following the brief rally inspired by the Hoover debt plan, a survey of chief executives of 12 NY commodity markets "indicates that the groundwork for a sounder commodity foundation is being laid by an improved statistical position." Possibility of price revival is seen as likely for 5 of 12 commodities and fair for another 4.

Editorial backing Pres. Hoover's position that he has no legal authority to declare an embargo on imported oil because of overproduction. While the tariff law gives the President the power to lay an embargo to combat "unfair methods of competition," this doesn't apply here. "The mere fact that there was a great oversupply of any commodity in this country would not make importation of it an immoral act" unless it could be proven there was a conspiracy among importers to demoralize the market. Producers must instead help themselves by voluntary curtailment of output.

While cotton textiles are in their seasonally slow period “strong statistical position” makes it “obvious that the fundamentals of the market are much stronger than they were a year ago”; this should continue into the fall unless producers abandon curtailment plans.

D. Willard, B.&O. RR pres., returning from inspection trip, says "Times are not as hard as people think they are. I have been as far west as Kansas, and never have I seen the crops looking better or the citizens in all sections apparently happier. Times are slow, yes, we have been forced to cut our operations 30% ... but I am confident the situation is temporary and a result of abnormal caution on the part of the buying public."

Officials at leading industrials say they're prepared to take advantage of an upturn when it develops, since the prolonged depression has led them to take many steps to lower costs and increase efficiency; many cos. will be able to show higher profit margins when business revives.

Week in review:

London conference adjourned late in the week; while it "undoubtedly ... made important progress in demonstrating the willingness of leading nations to work together for the restoration of international economic stability," it came up with no "definite solution of ... Germany's disrupted finances"; the major resolution adopted was that banks should maintain short-term loans to Germany at current levels, "which they had already been doing by informal agreement." Germany will likely have to look to France for a longer-term loan. While the German difficulties "are being ironed out, considerable unsettlement seems likely in European affairs."

Bank of England suffered severe gold drain to Europe (mostly to France), necessitating a rise in the discount rate to 3 1/2% from 2 1/2%. Sterling firmed in response, though the market isn't yet certain if this will be enough; some expect another rate hike in the near future to draw gold from the US. Marks firmed during the week but market was nominal due to rigid control of transactions. Berlin stock market remained closed until further notice. Other European stock markets were lower, with the Paris market least affected due to “relatively small French losses in Germany and the strong international monetary position that Paris holds.”

Fed. Reserve weekly statement indicated abandonment of recent five-week "campaign for a larger volume of credit" through buying govt. bonds; "experiment apparently proved futile under present conditions" as banks and businesses didn't make use of the greater supply of available credit.

Stock trading turned very dull; NYSE volume for the past week averaged 851,670 shares daily, the smallest week's trading since Nov. 1924. Prices rose early in the week but slumped toward week-end to end lower. Traders appeared to turn attention to domestic prospects after end of London conference, particularly upcoming dividend meetings; consensus developed that US Steel was likely to cut its dividend, bringing heavy selling into the stock that spread across the market; leading rails also affected by dividend uncertainty.

Bond trading quieter; German issues moved lower, sending some back close to their record lows; speculative European issues weak while higher-grade were irregular; S. American issues generally lower, with Argentine particularly weak. Domestic issues showed few noteworthy changes, particularly in the higher-grade section. Municipal bonds somewhat lower on quiet trading; Dow average of 20 long-term city and state bonds was at a 3.89% yield vs. 3.86% two weeks ago and 3.81% on June 26.

Minor upturn took place in steel production, but this was believed due to rebound from holiday shutdowns. Strength of price structure was hard to gauge due to lack of demand. US Steel seen likely to have barely covered preferred dividends in first half, and no indication is seen of substantial improvement for rest of 1931.

Grains showed narrow price movements, with corn dipping early in the week. Cotton rallied early in the week but then sold off along with stocks.

Germany special:

German govt. plans to lift all restrictions on internal payments by end of July. German banks agree to "work together for mutual support" in a "new and important measure" to "prevent recurrence of the recent disturbances" after current emergency measures including the partial banking moratorium are withdrawn. "With a motto of 'all for one and one for all,' the banks agree to assure each other all necessary financial assistance ... The Reichsbank will back the agreement." Darmstadter bank, on first investigation, appears to have enough reserves to cover losses and is likely to stay in business [note: large bank closed during German crisis].

Guaranty Trust says agreement at London conference is far from a solution to German financial problems, as further fundamental reforms are needed. German govt. failed to take some required "drastic measures" after the war; together with reparations obligations and political uncertainty; these led to complete inability of republican govt. to balance budget and to inflation that almost wiped out the formerly prosperous middle class. In more recent years, system of dividing tax revenue among local govts. on fixed basis has led to imbalance in which German Federal govt. is hard-pressed while local govts. often get revenues higher than estimated, encouraging "extravagance." Foreign borrowing over past decade has worsened problem; "instead of employing the funds for productive purposes, the states and municipalities have used them in social ventures and enterprises." Much of the borrowing is short-term, making Germany vulnerable to sudden heavy withdrawals during a crisis. Most encouraging aspect of current crisis is apparent realization by Germany that she must help herself; no country can indefinitely continue to run deficits and borrow to cover them. On the bright side, Germany has the best industrial system in Europe and relatively high per-capita income and wealth.

The NY bill (short-term paper) market believes the official estimate of $600M in German short-term debt owed to the US is a substantial underestimate; bill obligations alone are put at about $500M, and total credits as high as $1B.

Sterling advanced above the gold point in NY and Paris, but the sterling-franc rate remained slightly below the gold point in London, and Bank of England's heavy gold losses continued, with 3.8M pounds sterling exported Saturday, reducing holdings to a new yearly low of 137.8M. Swiss francs rose to a new yearly high. NY bankers expect Bank of England will need to raise rate again, perhaps to 5%. Seasonal demand for currency in August will make the Bank's position more difficult. “French action, whatever its motive ... is in marked contrast with the abstention on the part of the US banks from similar embarrassing action.” French short-term loans have been withdrawn heavily from England as well as Germany, in apparent French scare over British finances; one French bank over a week ago dramatically refused to accept some best-grade British banking paper. French financial circles are discussing a large US or French-US loan to England to support sterling. French gold reserves set a record, exceeding 57B francs, thanks to heavy British shipments; on Friday, seven airplanes landed 10 tons of gold outside Paris, while trains carried 4 tons. French bankers announced they intended to continue purchases as long as profitable.

Economic news and individual company reports:

Labor Dept. reports general surplus of labor in most of the larger cities in June; industrial situation little changed, with many plants on part time schedules; some expansion in building but activity remained below normal; work on 1932 municipal improvement programs has provided employment for many; volume of road construction higher in almost every state, absorbing many previously unemployed, and new contracts should provide additional work.

Winter wheat harvest nearing completion across the Southwest. "Low prices have startled the farmer" but haven't hindered his work; favorable conditions allowed harvest to be completed at very low cost. Much grain has been piled on the ground; many farmers are building sheds and filling them with grain; one farmer with storage space bought wheat from his neighbors, "arguing that it was cheaper to buy the grain than to produce it." Agriculture Dept. expects total world wheat crop 250M - 300M bushels less than last season, but still larger than the 1929 crop.

Fisher's wholesale commodity index fell to 69.5 vs. 69.8 prev. week, a new postwar low.

Treasury offering of $50M in 91-day bills oversubscribed almost 4 times; average rate 0.46%, a new record low. Few important local govt. bond sales are scheduled for the next few weeks; most new local govt. financing will apparently be in the short-term market for the time being. Demand for short maturities continues strong although yields have been moving steadily lower; Boston just sold an issue of $2M notes due Oct. 6 to yield 1%. The Japanese bond market is improving so rapidly that the Industrial Bank of Japan has announced plans to "convert into mortgage debentures the loans which it made to aid certain second-class companies to pass the year-end." Banks and other institutions, seeking reasonably safe investments, "are even besieging the government to issue more bonds."

ICC announces dates of further hearings on rail rate increase to be held at nine locations across the country during Aug.

Managed investment trusts [similar to mutual funds] have over $300M in cash and equivalents; "considerable of this will go into the purchase of domestic common stocks, once the way seems clear for an advancing market."

W. Farish, Humble Oil pres., testifies to Texas House investigation of oil industry; says situation in East Texas hopeless and legislation to stop overproduction an imperative necessity; production now up to 550,000-600,000 barrels/day; East Texas and Romania only two uncontrolled oil producing regions. Federal District Court nullifies Texas Railroad Commission curtailment order, deciding the Commission wasn't given power by Texas law to control oil production in order to support prices; didn't attempt to decide if such power would be lawful. Oklahoma Gov. Murray expected to issue conservation order shortly giving official force to “gentleman's agreement” for shutdown affecting about 80% of potential production of the Oklahoma City field. Gasoline in Chicago wholesale market firmed to 3 cents/gallon vs. 2 3/4 - 3 previously.

Youngstown district steel production will be up 8% to 42% this week. Youngstown producers expect to follow US Steel if it makes a general wage cut.

Nat'l Assoc. of Finance Cos. reports ratio of installment sales to total sales of cars, furniture, jewelry, etc. substantially the same during the depression as it was during the preceding prosperous period. About $10.7B of consumer credit is now outstanding, of which installment debt is $2.5B, open account credit $4.5B, small loans $1.5B, and life insurance loans $2.2B.

NY American estimates US tourists will spend $100M less abroad this year. In 1930, US tourists spent $811M, while $171M was spent in the US by visitors.

European nitrate conference in progress; no decision so far, but Chilean financial crisis seen making it imperative for them to reach agreement with European synthetic nitrate producers and avoid the price war that seemed to loom after breakup of the cartel last week.

In bidding for business in Omaha and Council Bluffs, Union Pacific points out that 30,113 people, or 12% of their population, are directly dependent on the railroad for their support.

Nat'l Biscuit's lower earnings in the first half was first interruption in their upward earnings curve in 14 years; co. still seen likely to cover dividend in 1931.

Earnings reports: General Mills year ended May $3.71/share vs. $4.83. North American Co. year ended June $3.89/share vs. $4.87. NY, New Haven & Hartford RR Q2 $1.00/share vs. $1.76; half $1.86 vs. $3.06. Studebaker Q2 $.56/share vs. $.41; half $.91 vs. $1.03.

Companies reporting decent earnings: Coca Cola International, Studebaker.

Report from Paris:

It's the peak of the tourist season, when European theaters compete "to exploit the world, the flesh, and the visitor from overseas." The traveler returns with memories of high priced tickets that admitted him to "gay and prancing revues, to squanderous exhibitions of draped and undraped nudity; bizarre dances and exotic settings; to a risque play or two; and to music halls where the lean and lithe of limb dance ... The Paris theater, particularly, has left its memory of color; not rainbow tinted but deep erotic colors that tell of the Orient ... and against this exotic background are forms - human bodies, dancing, swaying, posturing ..." [Note: Holy Toledo!] The reporter then goes on to say some lame stuff about how this is all for the tourists and "The real French theater has harked back to the days of chivalry; it is as stately as a minuet and as fully clothed as a Colonial dame"; in fact, all across the Continent, "the back-to-romanticism movement ... has been crowding tawdry and sordid pieces off the stages ..."

Joke:

An author recently stepped out of a taxi in front of the Lambs' [first "Professional Theatrical Club" in the US, founded 1870; still around, though not in its original location on W. 44th St], only to find he had nothing but a $20 bill to pay a $1.10 meter charge. The driver said that was the first $20 he had seen since shortly before the war, "and to expect him to change it amounted to mockery." The author turned to an actor lounging on the club's stoop and asked for a dollar and a quarter. The inevitable reply - "If I had a dollar and a quarter, do you think I'd endanger it hanging around here?"

The Irregular Blather July 26, 1931

No Journal was published Sunday, July 26, 1931. No time to blather today due to work emergency - see you tomorrow back in 1931!

Saturday, July 25, 1931: Dow 139.01 -3.62 (2.5%)

Germany special:

Berlin report: Although there was general disappointment regarding results of the London conference, and the Reichsbank and govt. are being criticized in financial and industrial circles because the domestic moratorium has again been prolonged, "more optimistic views everywhere are apparent." Transfers between Clearing House bank accounts are now allowed up to 50,000 marks, and unrestricted internal transfers are anticipated.

Sec. of State Stimson says will not discuss new financial aid when he arrives in Germany Saturday; it's explained that "questions of new money for Germany have been referred to the committee of the BIS which is to be appointed, and there is nothing that the Secretary could do about this subject." Washington expects the BIS study to "take quite some time, probably months." Stimson says increase of good feeling between French and Germans was a very worthwhile thing.

"No general policy has yet been adopted" on maturing German loans in London for which funds aren't available. "Limitation of transfers between German banks is causing considerable embarrassment but it is hoped that relief will come through the operations of the German Clearing House."

Rather strange editorial on “sanctions” clause in the Young Plan (for reparations); the clause provides that if a question arises whether Germany has acted to deliberately destroy the Plan, the matter shall be submitted to the Permanent Court of International Justice; Germany agrees that if the Court decides it has so acted, the creditor powers “resume their full liberty of action,” that is, are free to reoccupy German territory. Editorial approves of having the World Court decide.

London is still losing gold at a heavy pace; net of 4.3M pounds sterling was lost Friday, making 9.4M in the two days since the last statement and bringing holdings to about 141.6M; at least 4M of the total Friday went to France. Sterling rallied Friday, but renewed pressure was expected Monday; "future prospects are clouded by the fact that France is taking home her balances unmindful of the higher interest rates to be procured in London and apparently for purely political reasons." Bankers in NY believe Bank of England may need to quickly raise discount rate again to 5% to replenish gold stocks before the seasonal fall drain. US banking authorities will likely "give hearty support to any program looking to the reduction of the swollen gold stocks which the US possesses, particularly so if the metal were sent to London." Swiss francs made a new yearly high and guilders were strong. Hungarian Nat'l Bank raised discount rate 2% to 9%.

Assorted historical stuff:

Rep. Treadway (R, Mass.) again urges calling of the dreaded extra session of Congress, this time only a few days before the regularly scheduled time to make sure Congress can organize in time to approve the Hoover moratorium plan. Sen. Watson, Republican floor leader, said this wasn't needed.

Labor Sec. Doak and Commerce Sec. Lamont have written 125 operators of coal companies asking if they would attend a national conference of coal operators and employees. Pres. Hoover will decide whether to call conference after receiving replies.

After receiving several hundred telegrams from Southwestern and Western oil producers requesting an embargo on oil imports, Pres. Hoover received a ruling from Att'y. Gen. Mitchell confirming that he was not authorized by Congress to declare such an embargo. "With the London conference having adjourned and the international financial situation cleared, Pres. Hoover left immediately after lunch Friday for a week-end trip to his Rapidan camp."

Prof. H. Sperl, arguing Austrian case for customs union with Germany before the Permanent Court of International Justice, says Austria would be led "gently but firmly back into a barred cage" under interpretations of opponents.

Chinese residents of the US are being encouraged by the Nationalist govt. to return to China "in order to participate in the renaissance that is just beginning there"; educated Chinese are said needed to aid in industrial development.

Day-old Chilean cabinet headed by F. Gana resigns and is replaced by one led by C. Froedden, one of Pres. Ibanez' oldest friends.

Argentine govt. retakes control of towns of Corrientes and Resistencia after revolutionary disturbances.

Berlin is now being referred to in some European quarters as the Chicago of Europe [note: not sure if this is good or bad ...].

The "tin hat," a novelty used successfully during the war to reduce head injuries, is now replacing the traditional coal miner's hat made of canvas with a leather scoop. The latest hard-boiled chapeau is much improved, being made of light but tough fiber; it's designed to protect against falls of coal and rock from overhead, one of the main causes of accidents to miners. The hard hat was introduced by Philadelphia & Reading Coal; now, Lehigh Coal is offering it for sale, at cost, at all its mines. As a further safety measure, the hard-toed boot was recently placed on sale by P. & R. C.

Some large orchard areas of the country report a shortage of bees needed for pollination. This has created an industry of raising "package" bees in small boxes that are then mailed to growers, who, upon receipt, pull out a cork, releasing the bees to do their work. Colonies of bees are also rented, with a keeper maintaining them.

The artesian well which supplied ancient Pompeii with water has been rediscovered among the ruins; plans are now underway to reopen the well, lay new pipes, and make the Pompeii garden fountains flow as they did almost 1,900 years ago.

Interesting story on Albert J. Wright, successful stockbroker, member of the NYSE since 1885, with houses in London, Newport and Buffalo, who has just married "one of old Russia's patrician line" in a ceremony attended by the Archbishop of Canterbury and other world figures. Wright has been completely blind his whole business life ever since, as a star pitcher for his New England college, he was struck on the forehead by a "liner from a terrific batsman."

Market commentary:

Market wrap: Stock traders appeared to turn their attention to domestic developments following adjournment of the London conference. US Steel opened weakly on increasing speculation of dividend cut; other leaders generally declined. Trading turned very dull after initial selling; mid-day was sluggish except for isolated gains in issues including Gillette and American Woolen. A heavier wave of selling broke out in the afternoon, attributed to more general dividend nervousness and evening up for the weekend; oils and rails declined; Bethlehem fell sharply. Selling picked up momentum in the last hour; Steel, Can and other major industrials extended losses and the whole market was under pressure. Bond trading featured sharp afternoon downturn in German issues following a firm opening, bringing most issues close to their year's lows; remainder of foreign list turned reactionary although trading was relatively light. Domestic list "desultory" with price changes narrowly mixed; US govts. somewhat lower. Commodities weak; grains moderately lower; cotton down sharply in spite of unfavorable weather reports. Copper remained at 7 3/4 - 8 cents with buying small. Silver up 1/8 cent to 27 3/4.

Conservative observers continue to recommend the sidelines until "most of the uncertainties confronting the market are out of the way." [Note: Dec. 4, 2035]

Smaller trading volume in the past week reflects lack of interest in the market shown by the public as well as some professionals; many traders are also away on vacation. Even leading bears, who have maintained their short positions, have not been actively pressing. Thin markets have developed in many stocks.

"Judging from comments heard around the Street," the German situation "suggests possible developments which could be unusually disturbing for a time at least. Uncertainty over European conditions has kept many important traders out of the market in recent sessions."

No likely prospect of significant improvement seen in steel operations seen for the third quarter. Oil price increases in midcontinent field seen as encouraging. Wool trade seen getting further boost from announcement "in Paris that woolen garments for women will be the leading styles in all classes of clothing from dresses to evening wraps for the fall and winter"; this reverses a decision that hit wool manufacturers hard some years ago. Wool prices have been rising rapidly.

Curb Exchange [later Amex; small cos.] trading featured sharp break in Standard Oil of Indiana on dividend rumors; weakness spread to oils on the big board. Lambert (toiletries and medicinals) is reportedly target of a large short interest; recently reported Q2 net of $1.95/share was better than expected, almost covering the $2 quarterly dividend (stock is about 66).

J. Harris of Harris, Upham & Co. say cuts in US Steel's dividend and wages have long been known by many to be essential to any sustained uptrend. "Let there be a return to equilibrium. Let governments make no effort to keep up one class of prices, because they admit themselves they can't keep up all. Democracy professes fairness to all, partiality to none. Let it be displayed. ... There may be a paroxysm of fear because of dividend and wage reduction, but it will pass. Courageous, sane action is always ultimately rewarded."

Economic news and individual company reports:

Weekly banking statements showed discouraging reversal of credit expansion, as loans and investments at NY banks fell $93M, with all types of loans and investments sharing in the decline. Figures from the previous week had shown banks outside NY were still deflating credit; "now that the NY banks are apparently doing the same, only one conclusion can be drawn, namely that bankers are not yet ready to expand operations. Fed. Reserve officials appear to have recognized this. Last week, for the first time in 5 weeks," they stopped increasing holdings of govt. securities; apparently "active efforts to expand credit volume have been abandoned, at least for the time being."

Youngstown district steel production rose for the second time this week, and is now at 41%, an increase of 7% from the level starting the week.

Bradstreet's weekly reports trade and industry holding their own but "seasonal lull is unmistakably imminent." Very hot weather slowed retail sales in general but helped some lines. Dun's reports business mainly affected by seasonal influences; retailers generally reported "continuance of the buying which was noticeable last week." Price increases in some commodities helped public confidence. Wool, silk and shoes show particularly strong improvement.

Several state and municipal borrowers in the past two weeks have rejected bids for their bonds, including NJ, S. Carolina, and Boston; the first two have rejected bond tenders twice in the past few weeks, readvertising the bonds in hopes of getting better bids.

New bond offerings this week were $28.9M vs. $47.8M last week and $73.7M a year ago; $15.5M were public utility issues and $8.4M municipals.

Editorial noting ICC decision to further expedite rail rate case by barring “those who would question the reasonableness of railroad wage scales.” Many shippers have taken this approach in protesting the rate hike, asking “why they should be charged higher rates in order to support the 1929 wage scales for rail empoyees, at a time when prices and wages almost everywhere else are and have been coming down”; the ICC has now “slammed the door of its hearing room” on them.

Sir Otto Niemeyer completes study of Brazilian finances asked for by govt.; recommends various reforms including setting up a new central bank, minimizing bond issuance, attaining "budget equilibrium," and reorganizing post and rail services. However, report makes no mention of debt moratorium and contains "no indication that Sir Otto feels Brazil may not be able to continue to fulfill its external engagements."

British govt. will introduce legislation, if needed, to financially support the Indian govt. in order to maintain its credit “pending settlement of the constitutional question and of the financial problems which will arise out of it”; the Round Table conference to settle the question will be held in the fall. It's estimated 1B pounds of British money is invested in India. “Indian govt. securities have declined steadily from the time the Congress Extremists first talked of repudiation.” Agitation of merchants and mill owners to reduce value of rupee has caused export of capital, forcing govt. to persistently borrow sterling in London to support the rupee; a govt. of India bond issue failed in May.

French rail receipts from passenger traffic in first half were 1.401B francs vs. 1.474B in 1930, and from merchandise traffic 5.507B vs. 6.098B.

Mexican Finance Sec. Montes de Oca has called meeting of bankers and business leaders Saturday to "discuss problems associated with the continued decline of silver peso, which is reaching serious proportions." Shutdown of Mexican textile mills threatened by impossibility of buying raw materials using silver rather than US dollars or gold.

Chilean govt. cancels commercial treaty with Germany in response to increased German duties after breakdown of world nitrate cartel.

Canadian tax of 15 cents/copy on newspapers consisting largely of fiction will be delayed.

Life insurance claims paid in US and Canada in 1930 totalled $2.642B; largest claim was $4.690M by J. Dorrance, Campbell Soup pres.

Assessed valuation of NJ property fell from $5.576B to $5.529B in year ended July 1.

Total US pack of peas this year estimated at 13M cases, down 42% from 1930.

Gillette takes care of yet another lawsuit, settling an ongoing legal battle with United Cigar Stores by paying them $1.9M in cash to dismiss a suit and countersuit; the companies will now resume friendly business relations. Meanwhile, the shareholder lawsuit continued with testimony on pool operations in the stock in 1930.

Chrysler's strong Q2 report followed GM pattern of strengthening the balance sheet and cutting expenses. Chevrolet retail sales for the first 20 days of July were up 12% over 1930. American Chain's outlook improved by contract for cables and suspender ropes for proposed Golden Gate bridge, conditional on successful sale of bridge bonds. Mead Johnson (leading US maker of baby food) is selling around 80, only a little above its yearly low, in spite of an unbroken 14-year streak of increasing profits and 30 years of increasing sales. Stock now yields over 6% and is selling for about 8 1/2 times 1930 earnings.

Earnings reports: Caterpillar Tractor Q2 $.22/share vs. $1.20; half $.77 vs. $2.99. Gen. Amer. Tank Car Q2 $1.55/share vs. $2.44; half $3.02 vs. $4.58. Baldwin Locomotive half ($1.29)/share vs. $1.31. Allis-Chalmers Q2 $.40/share vs. $.94; half $.78 vs. $1.87. International Cement Q2 $.92/share vs. $1.91; half $1.57 vs. $3.25. New England Tel. & Tel. Q2 $2.38/share vs. $2.32; half $4.70 vs. $4.40. Corn Products Refining Q2 $1.05/share vs. $1.21; half $1.82 vs. $2.28. Hudson Motor Car Q2 $.19/share vs. $.67; half $.33 vs. $2.12. Amer. Bank Note Q2 $.09/share vs. $1.01; half $.14 vs. $2.00. Gen. Printing Ink Q2 $.48/share vs. $.71; half $1.26 vs. $1.53. Charis Q2 $2.01 /share vs. $2.18; half $3.28 vs. $3.48.

Companies reporting decent earnings: New England Tel. & Tel., Charis (women's apparel).

Jokes:

'How was the scenery on your trip?' 'It ran largely to tooth paste and smoking tobacco.' [Note: believe this is a reference to billboards.]

Sunday School Teacher - Now, if you saw bad boy cutting off a cat's tail, what would you read to him from the Bible to convince him that he was doing wrong? Boy - What God hath joined together let no man cut asunder.

Vaudeville:

Appearing at the Palace: "Ethel Merman, sensational blues singer of Girl Crazy, heads the excellent bill," displaying "remarkable breath control, excellent tone placement, ... perfect enunciation and a commanding stage presence." Lou Holtz is held over as master of ceremonies; he has "weeded out the bits of ineffective material he included in last week's bill and has replaced them with more spontaneous and enlivening samples of humor." William Gaxton has a new sketch in which he wins a bet that he can get four different types of woman to kiss him within five minutes.

Movie:

Holy Terror - a Fox film. George O'Brien stars as Tony Bard, the hero and "terror" of the title, who can "not only ride polo horses in the East to victory, but ... guide the most skittish western steeds over dangerous gulches in the Rockies to escape pursuing villains." Also in his skill set is taking a tail-spin in his plane and emerging "unscathed after crashing through the wall of a house into a ladies bathroom"; in fact, this is how he meets the heroine. Film opens with shooting of Tony's father while being visited by a stranger from the West; remainder of film concerns Tony's efforts to find the stranger and obtain a reckoning. In a final twist so ridiculous the reviewer feels the obligation to reveal it, the stranger turns out to be the hero's real father and the shooting accidental; ending finds hero and heroine "weeping copiously over the man hitherto regarded as a villain." Mr. O'Brien is likable as the hero; Humphrey Bogart is excellent as a ranch foreman employed by the mysterious stranger, making a believable villain.