January 27, 2010

Tuesday, January 27, 1931: Dow 171.19 +1.39 (0.8%)

Assorted historical stuff:

A. Wiggin, Chase Nat'l. Bank chair., testifies before Glass financial inquiry committee. Says current Fed. Reserve rates [2%] are too low, not forcing liquidation of security loans fast enough; total security loans, now $8B, should decline to about $6B; country still too stock-minded, but “they'll get over it.” Favors discount rate higher than market rate. Believes security affiliates of big nat'l banks provide valuable service and should continue, supervised by Comptroller of Currency. Against new legislation, particularly attempts to earmark credit; this would make people turn to “outside banking system.” E. Platt, former Fed. Reserve Board member, says discount rate was too low most of past decade; system was quick to create easy money market, but very slow in hitting the brakes when it became necessary.

Washington report: Senate has offered to shift fight over Power Commission to the courts. This may fit into a strategy of delay in order to promote govt. power development. Glass committee hearing can be summarized as Washington pointing accusingly and saying “Wall Street,” while financiers softly reply “Politics.”

Editorial: It's regrettable that the American Legion has endorsed immediate cash payment of veteran's [long-term] compensation certificates without limiting payment to those in need. The Legion argues this would provide necessary relief and stimulate business, this is the "familiar argument" that the country can be made more prosperous by adding to its debt. Needed payouts are estimated at over $2B in a 3 month period. This sum, as Sec. Mellon has pointed out, could only be raised by a bond issue; while the bonds certainly could be sold, they would withdraw that amount of capital from investment in local govt. and corporate bonds, damaging the "recovery of basic industry now slowly and painfully beginning."

Soviet foreign commissar M. Litvinoff says no forced labor is used to produce timber for export; rejects official requests from foreign governments to investigate labor conditions on grounds they are an internal matter. Rep. Hawley considering calling Ways and Means committee to consider how to enforce currently ineffective tariff prohibitions on forced labor. Soviet officials consider increasing bread ration due to sharp gain in grain surplus despite record 1930 exports. Spring sowing in collectivized areas in 1931 expected to total 44M acres vs. 27M last year.

British Parliament debating bill to reverse Baldwin act of 1927, which makes general strikes illegal, limits peaceful picketing by unions, and prohibit civil servants from joining unions. London markets rise as increasing chance seen bill will be defeated.

P. Laval abandons plan for forming French conciliation govt. when Radical Socialists refuse to participate.

Editorial by T. Woodlock: Careful and minute analysis of NY State barge canal demonstrates this inland waterway doesn't provide cheap transportation when costs are properly calculated; system is therefore an subsidy from taxpayers to some shippers, and is unfair to other shippers and other forms of transport.

Action of NY City Transit Commission awaited on unification; questions remain on transit co. valuations and on legal matters, including liability for personal injuries.

Edward I. Edwards, former US Senator and NJ Governor, dead by apparent suicide.

Detroit-Windsor tunnel usage estimated at 2M vehicles and 8M-10M bus passengers in first year.

US President's office expenses for 1932 FY are about $532,380 vs. $822,320 prev. year; items include Pres. salary $75,000; VP salary $15,000; office salaries $127,200; traveling expenses $25,000; maintenance of executive mansion & grounds $185,000.

Sonotone introduces new hearing aid incorporating 14 improvements in past 2 years; can be worn so as to be almost invisible, weighs only 5 1/2 ounces.

Jenkins Television Co. said making rapid advances in development; negotiating with several radio set makers for production of television sets; will soon have television broadcasting station in NY City to open market for sale of sets.

Greatest celebration of US Independence Day abroad is undoubtedly at Rebild Park in Jytland, Denmark; as many as 40,000 gather there on the Fourth.

Congress to act on name change for Porto Rico; it's charged this is a Latin corruption of the true name, Puerto Rico, meaning "Rich Port" (refers to San Juan).

"Siberian Mike," famed Eskimo dentist, dead in Canada. Mike got his start working as a dental mechanic for a dentist sent by the Hudson Bay Co. in 1922 to look after its many employees. When the dentist left, Mike kept most of the equipment and started a travelling practice in the Arctic regions of Canada and Alaska.

Market commentary:

Market wrap: Stocks opened slightly weaker, then fluctuated in narrow range most of the day; moderate rally started in the afteroon led by rails, was progressing at the close. Bonds less active; US govts. steady with some new highs; foreign mostly steady; corp. slightly irregular, investment grade firm. Commodities mixed; unsupported July wheat was up while corn was down sharply, reaching new low since 1922 at 63 5/8 cents for March delivery; cotton little changed. Copper buying quieter. Silver brokers somewhat more optimistic in near term; Chinese selling has dried up, and market is receiving steady buying from Indian bazaars.

Market observers warn against taking short side; would add to long positions if industrial average broke through top of range on good volume.

More aggressive sponsorship seen in the market in past week. Also noted was larger scale short covering; bears were said particularly disconcerted by advances in rail and utility averages to above recent range. However, a large short interest still exists.

Market interests note sharply improved sentiment over six weeks ago; worry over banking situation has receded, as has pessimism over stocks.

Rail shares were a strong spot again; other strong points included food stocks and GM; some trading favorites including Auburn and Case rallied sharply.

Junior rail issues have fluctuated widely as sentiment swung from one extreme to the other in the past two years; current values seem a more balanced measure of worth. Rails in 1931 are expected to control expenses and conserve cash; dividend increases are considered unlikely.

Broad Street Gossip: Recent new highs for some US govt. bonds may be explained by corporations diverting their cash due to low short-term rates. Trade reviews have been reporting improvement in business; significantly, three foreign countries have reported improvement. This year's improvement has a better chance of being more than seasonal since the depression is a year older. Oil production is down 21% below a year ago, but shares are down due to declining prices; improvement is seen depending on production remaining well below consumption. Copper industry is suffering from low prices although it's operating at higher capacity than many others; consumption is estimated at 80% of normal.

Former British Chancellor of the Exchequer R. Horne says debt payments not a burden to British people, since payments to US are balanced by payments from European debtors; believes hopes for any concessions by US on debts in near future are groundless.

Bank of Nova Scotia sees pessimism now exaggerated, “just as in the latter stages of every other period of depression.” Sees “lack of historical perspective ... Severe as it is, the present depression is not more severe than other great depressions in time past”; main difference now is “our almost complete awareness of the mishaps that have befallen other nations.”

Guaranty Trust of NY sees situation “unquestionably better” than a month ago; numerous branches of industry report higher output and employment; stock, commodity, and bond markets have improved tone. Not yet possible to judge definitely if upturn is of more than seasonal significance, especially remembering the even sharper upturn a year ago. However, “impossible to escape the feeling that the recent expansion may be a sign of the approach of better times.” Recovery must be gradual, sound and conservative; businessmen should by now realize the “uselessness and danger of false starts.”

Economic news and individual company reports:

Open hearings of Steuer investigation into Bank of US stopped due to suit asking removal of Steuer as prosecutor; closed hearings continue, 8 former bank employees testified. W Macy, NY State Republican chair., says legislative investigation of Bank of US to be speeded up due to lack of progress by other probes.

Record high of about $3B to be spent worldwide on road construction in 1931, much of it to relieve unemployment; US leads with about $2B.

About 1,549 chain store units were opened in 1930, down more than 50% from 1929.

US Steel to report earnings after close today; likely to be between 30-40 cents most recently estimated and $1 estimated before that.

Editorial: The ICC has proposed abandoning the convoluted recapture of "excess" profits from railways while simultaneously switching from one convoluted method of calculating allowable rates to another convoluted method. This may or may not be a step forward, depending on some convoluted factors.

Agriculture Dept. estimates value of livestock on farms at $4.366B vs. $5.888B a year ago and $6.006B two years ago. Agricultural outlook conference to be held, report issued Feb. 2. Despite low commodity prices, some encouraging factors seen in low feed prices and improbability of drought for second year in a row.

Canadian report: Premier Bennett notes onerous financial obligations; for FY ending Mar. 31, deficit about $100M; bond maturities of over $1B will need to be met by 1934. Some talk of tax increases, though country believed in no mood for them. Chartered banks said to have strengthened position in 1930; money in circulation and liability to govt. decreased, while investments rose; cash resources and earnings well maintained. 1930 auto production 154,192 cars, down 41.3% from record 1929 level. Dec. building permits in 61 cities $15.4M vs. $11.8M in Nov. and $14.7M in Dec. 1929; full year $163.8M vs. $234.9M.

Argentine provisional govt. reduces price of bread in public markets to 2 cents/pound from 3 1/2 cents.

IBM does business in 77 countries; record monthly business was reported in Dec. for France, Mexico, and Cuba.

New Montgomery-Ward catalog published later than usual to allow lower prices; has 592 pages vs. 552 last year, lists 40,000 items in 86 departments.

Loew's earnings for 12 weeks ended Nov. 21 were about $1.60/share vs. $2.09 in 1930; fiscal year ended Aug. 31 showed record earnings of $9.65/share. Latest earnings seen as surprisingly good considering autumn slump in movie attendance. In recent weeks, receipts have picked up substantially.

Companies reporting decent earnings: Waldorf System (restaurants).


Resurrection - adapted from the Tolstoy novel, starring Lupe Velez as Katusha Maslova and John Boles as Prince Dmitri. Disappointing as a whole, though Lupe Velez gives thoroughly convincing performance of transformation from playful peasant girl to prostitute wrongly accused of murder.


"Jaywalker - So many people are struck by autos while alighting from street cars. Street Car Official - Well, yes; but those people have paid their fares. It's this running over people who are waiting to get on that makes me mad."

'So you want to join our theater company. What plays have you appeared in?' 'My last engagement was The Blot on the Escutcheon.' 'What part did you play?' 'I was the blot.'

"'I want to see the boss.' 'What do you want to see him about?' 'About a job.' 'I'm sorry, but you can't see him; he's in an unemployment conference.'"

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