Monday, January 26, 1931: Dow 169.80 -2.04 (1.2%)

Assorted historical stuff:

Editorial: Unemployment conference of seven Northeastern governors called by NY Gov. Roosevelt was refreshingly free of politics. Most encouraging was the recognition that a huge amount of exploratory work is needed before the subject is ready for legislation. Employment insurance can't be developed rapidly enough to relieve the current depression, and appropriation of public funds for it would mean buying votes at the expense of taxpayers, so should be barred by "elementary civic morality." Future conferences should include voices from the business side of the table. Civic, social welfare, labor organizations form Committee for Promotion of Unemployment Insurance Legislation; want maximum weekly benefit of at least $15.

Glass committee hearings have given a more complete picture of conflicts within Fed. Reserve in 1929. The Fed. Reserve Board, concerned about security inflation, issued a warning to banks in Feb. 1929 against direct or indirect use of Fed. Reserve credit for speculation. The NY Fed. disagreed with this policy of direct pressure on banks, favoring raising the rediscount rate as high as necessary to curb speculation; the Fed. Board feared the effect this would have on business and agriculture. In May 1929, the Board asked G. McGarath, Fed. Reserve agent at NY, to further remonstrate with certain NY banks; he apparently refused. In late May the Fed. Board decided to rescind the pressure due to seasonal credit needs.

Prohibition report: Some Congressmen, particularly drys, seem to be commenting on the (90,000 word) Wickersham report without having read all of it. Both Republicans and Democrats are likely to face increasing pressure to take a definite stand soon. Congress seen likely to appropriate more money for enforcement.

Editorial: Vote by the Senate to reconsider their approval of the Power Commission nominees is "donkey-minded" obstinacy. The Senate has already exercised its "advice and consent" function and ratified the nominees; they have no constitutional right to recall the ratification.

World disarmament conference definitely set for Feb. 2, 1932 in Geneva.

NY State Sen. Mastick predicts $16M deficit in NY State budget this year, says Gov. Roosevelt must find new means of taxation to balance budget.

Editorial by T. Woodlock regarding Gov. Roosevelt's apparent interest in lower-cost electricity for domestic (home) and farm consumers. Asserts that home consumers, in spite of paying higher rates per KWhr, are less profitable than commercial due to lower load factor.

J. Van Dyke, Atlantic Refining chair., meets Cuban Pres. Machado; co. is exploring for oil in Cuba.

A recent worldwide study finds the country with the most inventive population is Switzerland. This is attributed to religious persecution in the 16th-17th Cent., during which many skilled craftsmen left neighboring countries and settled in Switzerland.

Cellophane candy wrappers found safe to eat; rats successfully maintained on diet of 20% cellophane.

Music publishers report US music now dominates world. More US sheet music and records are sold in England per capita than in the US; travelers report hearing US jazz tunes in Shanghai, Bombay, Port Said, and played by Zulus in Africa. Some tunes become popular abroad long after they've been forgotten at home.

Market commentary:

Market wrap: Stocks opened somewhat lower on accumulated sell orders; some rallying came in after selling was absorbed, with upswing broadening to the general list; however, market grew increasingly unsettled near the close, with sharp declines in some issues. Bonds active, steady to firm; investment grade strong. Commodities weak; grains and cotton down.

Week in review: Bears renewed pressure early in week, but were unable to force the "necessitous liquidation" seen last fall; stock market turned very dull on declines, then reversed into uptrend that appears likely to run for some time to come. Bond market active and strong in spite of heavy new financing; institutional demand was good for high-grade issues, while more individual investors came in. Short term rates declined, with call money, bankers acceptances, and commercial paper all easier; Fed. seen continuing easy money policy. Grains moved irregularly down in narrow range. Cotton moved up moderately but steadily. Steel operations continued gradually upward. British gold loss to France continued most of the week; francs not affected by defeat of Steeg govt.

Conservative observers remain cheerful, encouraged by rally last week; advise picking up standard shares on a scale during setbacks, taking profits on rallies.
Considerable profit-taking was reported during the rallies late last week; however, this was balanced by short covering and increased outside buying.

Market sentiment seen better, with recent rally believed more than merely technical. One indication is impressive resistance of leading shares to sharply lower corporate earnings in the fourth quarter; earnings declines have been much worse than anyone would have predicted several months ago. Also positive is better business sentiment, as reflected in recent statements by business figures; bond market strength is also noteworthy. Substantial trade recovery isn't expected for several months, but investors are likely to act in anticipation of it.

Banks are reportedly increasing buying of high-grade bonds; yields on these are better than what they can get loaning out time money.

Gold mining stocks have been among the strongest performers since year-end; earnings this year seen exceeding both 1930 and 1929; miners are benefiting from stable price as production costs decline.

London Daily Herald blames sudden weakness in British pounds on fight between US and British banking interests after US banks didn't get enough recent "profitable foreign financing business." Report is met with ridicule in New York.

Market orders are being executed with record speed these days; average report on a 100-share or better market order was given to client within 3 minutes.

Broad Street Gossip: It's a very satisfactory market that goes up on bad news, just as it's an unsatisfactory market that goes down on good news. The Old Timer: When you get bearish, just figure that, ten years from now, production of steel, copper, cars, etc. will be 25%, 50%, or more greater than the best year we've had yet; earnings should gain proportionally. First Trader - The number of investigations under way in Congress is record-breaking. Second Trader - They should now begin investigating the investigators. First Trader - There will be few Congressmen left to investigate the investigators who are being investigated.

S. Blaylock, Consolidated Mining and Smelting of Canada GM, says believes prices of metals have reached bottom, slow recovery ahead.

P. Weld, NY Cotton Exchange pres., says cotton growers working against themselves; based on experience, "nothing but disaster will make the farmer cut his acreage."

Bank of Montreal says persistently low commodity prices are discouraging buying and obscuring outlook; however, adjustment to lower scale of prices is progressing, and there are moderate gains in some industries.

US Chamber of Commerce says reports from member organizations "justify the hope that the dead center of the depression is past." Most reports indicate slight increase in activity and improvement in employment. Reinforcement of public confidence seen as essential. Hopes Congress avoids extra session.

George Baker, "dean of bankers," says short selling at present time would be unwise; looks for slow improvement in financial conditions. Mr. Baker has over 70 years of business experience; he is known for meaning what he says and saying it in as few words as possible.

Economic news and individual company reports:

Fisher's wholesale commodity index declines for 7th week in a row, to 77.6 for week of Jan. 23, vs. 80.7 for week of Dec. 5.

Youngstown District steel production to advance 1% this week to 49%, fifth consecutive weekly gain.

Chain stores including Kroger and J.C. Penney litigate against Anti-Chain Tax Law recently enacted in Kentucky.

After 8 months of study, oil operators reach plan for unit (cooperative) development of Kettleman Hills field (California).

Taxes paid by rails in 1930 were about $356M, down $46M from 1929, but a record high 6.6% of operating revenues vs. 6.3% in 1929.

US aircraft production in 1930 was 2,684 valued at $21.5M, vs. 6,034 valued at $44.5M in 1929. Aircraft sold in 1930 were 3,125; sales in 1929 not available. Most common type produced was the three-place open cockpit biplane.

US leaf tobacco exports in 1930 were 579.7M pounds valued at $145.6M, vs. 565.9M valued at $146.1M in 1929.

AFL Executive Council opposes Eastern rail consolidation unless proper guarantees given workers that their interests will be protected.

Schulte Retail Stores and United Cigar Stores reduce cigarette prices; retail cigarette price war feared.

Foreign investment in Canada at end of 1930 was $6.376B vs. $6.147B at end of 1929.

German unemployed Jan. 15 were 4.765M vs. 4.357M on Jan. 1.

Texas Railroad Commission reduces allowable crude oil production to 644,253 barrels/day from 680,238 previously.

E. Grace, Bethlehem Steel pres., says will appeal decision prohibiting merger with Youngstown Sheet & Tube.

Deere 1930 earnings were $6.06/share vs. $13.13 in 1929. Auburn Automobile 1930 earnings $5.43/share vs. $19.21; sales $24.1M vs. $37.6M.

Companies reporting decent earnings: Southern Pipe Line, Douglas Aircraft, Buffalo & Susquehanna RR (against industry trend).

Movie:

Fighting Caravans - from a novel by Zane Grey. Another dull western; gives impression covered wagon trips to the West Coast were interrupted by frequent hilarious drinking bouts. Even romantic interludes between Gary Cooper and Lily Damita are uninteresting. Some beautiful photography, and two or three exciting episodes near end of film.

True story, I swear - it happened to my great-grandfather's brother-in-law:

Two Prohibition agents recently came to NY City, and, posing as strangers in town, asked a taxi driver to take them someplace they could buy a drink, winking a couple of times to make sure the driver got the message. The driver, endowed with the sixth sense that most NY taxi drivers possess, nodded knowingly. The cab started uptown. Columbus Circle passed, as did 72nd, 96th, etc. Finally, one of the agents asked "Hey, where you taking us?" "To Canada," the driver replied.