January 8, 2010

Thursday, January 8, 1931: Dow 171.86 -0.80 (0.5%)

Assorted historical stuff:

Editorial: While the auto industry has been as hard hit as any by depression, the corrections the industry has made "promise that 1931 will write a more cheerful story than did 1930." Production has been tightly controlled; automakers have improved efficiency and lowered prices. Auto finance companies are in good shape, with low defaults. 1930 sales of about 3.5M vehicles are likely below replacement demand. "Thus the motor industry has promptly and courageously met the inevitable. ... This foremost of American manufacturing industries ... will in all probability set this year's industrial place for the country."

Editorial: Sen. Ashurst's inadvisable proposal for a large land purchase from Mexico is, thankfully, likely to be "entombed" in the Foreign Relations Committee along with its predecessors. However, it's sure to be "misunderstood, overestimated, and resented throughout Latin America."

Chair. Woods of the Pres. Emergency Employment Committee estimates US unemployed at 4M - 5M.

NY Gov. Roosevelt's annual address at the Capitol in Albany: Asks funds for commission to help maintain employment. Public works being speeded as far as possible; asks for more appropriations and elimination of "archaic" laws to speed things up. Urges old age insurance and labor protection laws. Recommends four-year Governor's term. Asks for action on public development of water power to provide cheaper electricity for people of the State.

German Fin. Min. Dietrich says unemployment insurance is mortal danger to capitalistic system, can't be maintained at present level of $750M annually; proposes replacement of dole with payment of premiums to employed workers, allowing companies to reduce costs and hire more. Govt. announces Dec. cost of living index 7% below 1929, proving campaign to lower prices making headway.

Editorial in Miami Herald praising E. Romfh, First National Bank of Miami pres., for calming public fears after the City National Bank failed: “the First National Bank is the Big Bank. If calamity had overtaken it, the entire financial structure of Miami would have been swept away.”

Lee Adam Gimbel, former NYSE member and onetime Gimbel Bros. VP, dies by falling or jumping from 16th floor window of Yale Club.

Filling out income tax returns has become "an annual bugaboo"; as March approaches each year, the air is full of complaints "and many hours are spent moiling over masses of figures." A particular complaint is that each source of income has to be specified; the return forms of 1871 gave taxpayers some relief by not including this requirement.

Telephone companies are reminding subscribers that they have 60 or 70 gadgets in stock to meet particular needs; for example, for 15 cents a month, you can get a switch letting you turn off the bell of your bedside extension phone when you go to sleep.

H.M.V. Gramophone Co. says has perfected television transmission to make tiny details clearly visible, transmit over practically unlimited distances.

The King Hotel opened for Christmas in Jerusalem; a modern hotel, costing $1M to build, with views of the Jordan River and its valley, the Dead Sea, and the hills of Moab.

Contract signed between King Ibn Saud and Marconi co. for 15 wireless stations to link important centers in Hedjaz and Nejd; Muslim engineer to install the equipment in Mecca.

Market commentary:

Market wrap: Stocks advanced most of the day on quiet trading; some resistance developed in midday and profit-taking in the late afternoon caused sharp recessions from the day's highs and some "cross-currents," but the selling was generally absorbed well; rails and banks strong. Bond market continued strong in almost all departments. Commodities also continued strong.

Recent sharp bond rally has been big help to market sentiment; Dow bond average has gained from 92.83 on Dec. 17 to 96.54 currently. Some are skeptical on whether the rally marks real improvement, attributing it to new-year reinvestment demand and relief from the Dec. bank disturbances that caused banks to liquidate bonds. Other possible factors are the New York Fed. rate cut to 2%, and the end of tax selling. Observers will be closely following bond action over the next week; continued advances "would suggest growing confidence in the longer financial outlook."

Short covering reported more urgent in past few sessions when market is rising, indicating bears who contested the upturns early this year are growing less confident. Some outside buying is also reported to be coming in when the market declines.

The Dow theory of averages, which successfully predicted all the major swings of 1930, now indicates both industrial and rail averages are headed higher. The latest signal was last Saturday, when the industrial average broke through the resistance of Dec. 18 while the rail average broke through that of Dec. 20. Both averages again reached new rally highs on Tuesday.

NBER review of the history of high grade rail bond yields since 1857 shows historical pattern that precedes business recoveries: peak in call money rates is followed by peak in time money and commercial paper rates, then peak in high grade bond yields, then peak in second-grade bond yields, then bottom in stock prices; this is generally followed by business recovery within months.

If previous year's trends are followed, rail car loadings should improve in the next few weeks; in past 5 years, loadings reached their low in the Christmas week.

Broad Street Gossip: Increased efficiency has allowed some lines of industry to make relatively good showings in spite of lower prices for products, reduced production, and maintenance of high wages; these conditions would have caused very poor showings ten years ago. Automobile output last year was about 3.5M, and there are about 26M cars now in use in the US. "Figure for yourself the life of an automobile, and then reach a conclusion as to whether there will be an increase in the demand for them before the end of the current year." Some “very prominent financiers” reportedly buying stocks over the past several weeks.

Economic news and individual company reports:

Steel industry reports considered encouraging. US steel unfilled orders as of Dec. 31, to be announced Saturday, expected to be up over 200,000 tons to 3.850M. Current industry output estimated at 41% for the current week and 36% for the week ended Monday, vs. 24% previous week. Scrap prices up slightly. Gain in new steel buying reported so far this year, though a decline was expected; further gradual improvement expected this month and into Feb. Auto industry production improving more quickly than expected.

US and Canada car and truck production in Dec. estimated at 155,185 vs. 134,844 in Nov. and 125,502 in Dec. 1929; full year 3.505M vs. 5.622M; current inventories of new cars 25% below a year ago.

NY Auto Show seen exceeding expectations; public reception enthusiastic. Few outstanding innovations; “principal talking point ... is sensational value offered at new low prices.” Some reports of sales better than last year, but more significant sales are usually made when exhibits travel around the country. Pres. Hoover addresses show direct from Washington by radio: future prospects of auto industry don't warrant despondency, 1930 sales not cause for pessimism.

Bankruptcy hearings of four Bank of U.S. affiliates continue; testimony heard that of the total of $52M in assets at these affiliates that the receiver is attempting to account for, $44.570M consisted of Bank of U.S. stock. D.A. Crain announces he will make public the results of his investigation; bank officials expected to be called before the grand jury next week. A. Broderick, NY State Superintendent of Banks, proposes changes to State banking law giving Superintendent more power to force mergers in emergencies, and limiting investment of banks in affiliated corporations. Remarkable increases reported in deposits at larger banks as of Dec. 31; Chase National $2.074B vs. $1.691B on Sept. 24; National City $1.460B vs. $994M; Guaranty Trust $1.342B vs. $1.181B.

Eastern rail consolidation plan would keep the four main Eastern lines in in their current ranking in terms of revenue and earnings: Pennsylvania, New York Central, Chesapeake & Ohio - Nickel Plate, and Baltimore & Ohio. The B. & O. seen faring well in the plan.

Justice Dept. seen likely to appeal Packer Consent Decree modification directly to Supreme Court.

Agitation for oil tariff said gaining; administration is opposed.

Russian purchases of industrial equipment in US were $46.1M in year ended Sept. 30 vs. $11.4M previous year. Russian 1930 cotton crop estimated at 2M bales vs. 1.351M in 1929.

British registered unemployed on Dec. 29 were 2.643M vs. 2.408M on Dec. 22 and 1.510M on Dec. 30, 1929.

Chile ends 1930 with unexpected surplus of 2.5M pesos.

Panama Canal tolls in Dec. were $2.193M vs. $2.098M in Nov. and $2.309M in Dec. 1929.

Manhattan construction plans filed in 1930 were 560 buildings for $162.7M vs. 837 buildings for $543.9M in 1929. Plans filed in Dec. were 17 buildings for $2.1M, lowest for a number of years. Top month in 1929 was April, with 166 buildings for $176.8M.

NY Supreme Court Justice L. Faber issues ruling restraining Eugene McCann from circulating false rumors regarding securities. Mr. McCann, A.K.A. Stewart Brooks, A.K.A. John Clark, is a stockbroker with offices at 52 William St; action was the first of its kind undertaken by the NY Attorney General.

Companies reporting decent earnings: Wilson & Co. (meat products), Mathieson Alkali, Alaska Juneau Gold Mining, Blaw-Knox (steel and construction products).


Judge, examining prospective citizen: "Can you tell me the difference between the powers and prerogatives of the King of England and those of the President of the United States?" "Yes sir - the King, he's got a steady job."

"I clung to him confidently. His strong, muscular arm encircled my waist and held me up as we waltzed and glided about. One of my hands laid upon his broad shoulder, the other rested in his, and from time to time he squeezed it and smiled. ... We knew everybody was watching us, but we didn't care. We were young, and happy. Youth never cares, does it? We danced and danced, gazing into each other's eyes. Then the bell clanged and the fight was over."

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