January 7, 2010

Wednesday, January 7, 1931: Dow 172.66 +1.95 (1.1%)

Assorted historical stuff:

Editorial by T. Woodlock: “so complete is the contempt of the Russian leaders for the rest of the world that they do not even pay it the compliment of lying to it.” They clearly announce their goal of world revolution, and their stand against everything our civilization is founded on - property, family, and religion. And yet even our supposedly hard-headed businessmen want to deal with them. “Is it any wonder that the Communist International has faith in the World Revolution when it finds in the US, of all places, such a combination of myopic ignorance, moral astigmatism, and business cupidity?”

Rep. LaGuardia (R, NY) asks Congress for vote allowing drought relief funds to be used for food loans to city unemployed workers.

NY Gov. Roosevelt asks D.A. Crain to "prosecute vigorously" the Bank of U.S. case. Bankruptcy hearings reveal $52M was placed in four bankrupt affiliates, not all of which has been accounted for.

Labor Sec. Doak asks additional appropriation of $600,000 to be used for deporting aliens illegally in the US; estimates there are currently 400,000 illegal aliens in the US, of whom about 25% are eligible for deportation.

Farm Board chair. Legge defends Board's policies to mass meeting of farm organizations; says wheat prices would be cut in half if US depended on the export market to dispose of wheat.

Editorial: Decision to allow meatpackers to make, distribute, and wholesale other foods will probably benefit the public in lower prices, but would have benefited them even more if the packers had been allowed to enter the retail field. The Court seems to have prohibited this because of the fear it would hurt the individual retailer, though there doesn't seem to be a solid legal basis for this decision.

British govt. confers with coal mine owners in attempt to end South Wales strikes. Coal miners claim owner proposals would mean 53,000 miners would be paid only $5 weekly after deductions, meaning "irretrievable ruin" for a community already "reduced to beggary."

Strikes declared by textile weavers in Sweden and Britain.

Illinois establishes "Buyers Buy Now Bureaus" keeping lists of bargains advertised by local stores.

Helena, Ark., a river port and agricultural center, now has no open banks; merchants report small bills scarce, trouble making change for customers.

Los Angeles Stock Exchange opens its new $1.65M building on Spring Street; main facade, 50 feet high, is limestone and polished granite, with base topped by scultures depicting the various stages of economic progress.

American Red Cross says spent $849,965 for drought relief in 1930.

US Army reports number of fatal flying accidents in 1930 was 37 vs. 42 in 1929 and 61 in 1928. War Sec. Hurley recommends adoption of seven-year motor vehicle replacement program for the Army to cost $2M annually; total of 6,139 vehicles to be purchased, mostly trucks.

World's longest single lift passenger elevator to be installed in Carlsbad caverns, running from the natural cave entrance to upper levels of the caverns 750 feet above. Seven miles of the upper levels have been made accessible to visitors; one chamber, called the Big Room, is almost 4,000 feet long, and has a maximum width of 625 feet and maximum ceiling height of 300 feet.

Market commentary:

Market wrap: Stocks were irregular in the morning, but then strengthened; good recoveries took place in the standard shares, and a firm tone was maintained to the close. Bond market rallied strongly through the day as call money remained at 1 1/2 percent; US and foreign govts. higher; corp. strong with sharp rallies in many speculative issues. Commodities firm, with good rallies in grains; however, silver hit another record low at 29 1/2 cents.

Rails and major industrials were strong. Tire shares remained weak after Goodyear of Canada announced 10%-15% price cuts. Warner Bros. advanced sharply as a new pool began operating in the stock.

Automotive stocks have been drastically deflated, with several leaders selling at 10% to 38% of their 1928 highs. However, investors who bought in 1923 have gotten very good results; in that period, in quite a few cases, the stock has paid out total dividends several times the original investment, and the stock itself is still worth a multiple of the original investment.

Conservative observers remain cheerful, noting recent profit-taking has been absorbed well; continue to advise picking up standard stocks on technical reactions.

Frazier Jelke survey of 100 leading common stocks shows 1930 decline in value of $8.7B to $20.7B. Largest decline was in mines, down 57.1%; smallest was in foods, down 6.6%.

Insurance cos. are reportedly increasing buying of railroad common stocks rather than bonds and preferred stocks.

A Sloan, GM pres., offers tempered optimism for 1931: "We should not be disappointed if the year 1931 is not as good as we have hoped and as some of the prophets say it is going to be ... For the long pull there is no question as to the future. I am sure that though 1931 may be disappointing, before we get through the year we will see a change in the trend. And we will be building the foundation for a still greater 1932 and 1933."

Those criticizing the recent market recovery have said many business adjustments remain to be completed. However, in all previous business depressions a stock market recovery has started before all adjustments were complete.

Broad Street Gossip: Rally in stocks and bonds since start of year has greatly improved public sentiment. Because of great prosperity of the last 25 years, few thrifty people are not owners of stocks and bonds; when these shrink in value every day, it must affect confidence and willingness to buy. Bear contingent is reported smaller, with several of the big operators having switched to the bull side or retired to the sidelines. One of the country's richest men told a friend that his fortune had shrunk to a third of what it was at the peak last year, but "I am not discouraged in the least. Over the last quarter of a century, my fortune has shrunk very badly on five different occasions, but I know this shrinkage is temporary. After every sinking spell, what I own always soars to a new high."

More companies are encouraging stockholders to become boosters of their products by sending them advertising and samples; for example, new holders of American Tobacco are sent a glass humidor containing Luck Strike cigarettes.

Investors are now disagreeing on how to value stocks. Price earnings multiples are not very useful because earnings are now so unpredictable; book value "has lost what little significance it had"; stock prices show no "semblance of order" even when compared to probable 1931 dividends.

Economic news and individual company reports:

Many industries report rehiring thousands workers laid off in the closing months of 1930; rails and automotive companies are rehiring particularly heavily.

Rail freight loadings for holiday week ended Dec. 27 were 538,419 cars, down 175,391 from prev. week, down 100,970 or 15.7% from 1929 week, and down 129,555, or 19.4% from 1928.

Oil refineries operated at 58.7% in the week ended Jan. 3, lowest rate on record; gasoline stocks increased 392,000 barrels in the week to 39.780M vs. 42.314M a year ago. Crude oil production was 2.082M barrels/day, down 44,650.

15 leading utilities earnings per share in 1930 were about 11% under 1929; shares sold on Dec. 31 at 15.6 times earnings.

Total market value of all NYSE-listed shares on Jan. 1 was $49.020B vs. $53.312B on Dec. 1. Total borrowings on securities by NYSE members were $1.893B, or 3.86% of total value, vs. $2.162B or 4.06%.

End of year NY bank statements show remarkably strong condition; "cash" (immediately salable) assets are generally well over 50% of demand and time deposits combined. Chase National Bank statement of Dec. 31 shows it to be "by far the largest bank the world has ever had," with deposits of $2.074B.

R. Stephenson, Amer. Bankers Assoc. pres., says banking situation sound. Calls on public to help uphold high standards in banking by patronizing banks that practice careful policies; criticizes popularity of "easy" bankers who offer unsound loans or unjustifiably higher rates and free services.

Steel industry, while refraining from public predictions, has privately been guardedly optimistic on 1931. Consensus is for a slow recovery, gaining temporary momentum in the spring, but not reaching definite improvement until midsummer; from that point, things are expected to compare very well with 1930. US Steel to report year-end unfilled orders Saturday; some expect substantial gain of 300,000 to 400,000 tons, but year-end adjustments make things uncertain.

Banco Pelotense, a Brazilian bank with $16M deposits, closed; govt. says will protect creditors and depositors.

Metropolitan Miami building permits for 1930 totaled $7.375M; 93 residences, costing $1.671M, were built in Miami Beach.

S.S. Kresge Dec. sales were $23.4M, down 1.1% from 1929; year's sales were $150.4M, down 3.8%.


The Right to Love, starring Ruth Chatterton - takes an interesting approach to talkie production by reviving two old silent cinematic devices to good effect: the double exposure, by which Miss Chatterton plays a mother and her daughter, both on screen at once, and the flashback.

At the galleries:

Marie Harriman Gallery is showing a portrait by Henri Rousseau from 1901, of his friend Joseph Brummer. Brummer originally got the painting in exchange for a tube of paint and some canvas. He sold it to a German collector in 1910 for $60. A noted Russian collector acquired the portrait during the war. Five years later, the Russian collector was forced to sell, and Mr. Brummer attempted to buy the painting back for $6,000 but was outbid by the celebrated Japanese collector Fukushima. Estimates are that the painting if sold today could command about $15,000.


"A small boy asked his father how wars begin. 'Well,' said his father, 'suppose that England quarreled with France -' 'But,' interrupted the mother, 'England mustn't quarrel with France.' 'I know,' he answered, 'but I am taking a hypothetical instance.' 'You are misleading the child,' said the mother. 'No, I am not.' he answered. 'Yes, you are.' 'No, I am not.' 'Yes.' 'No.' 'All right, dad,' said the small boy, 'I think I know how wars begin.'”

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