Friday, February 20, 1931: Dow 184.46 +3.36 (1.9%)

Assorted historical stuff:

Senate passes House version of veterans' bonus 72-12 without amendment, following limited debate; Presidential veto expected.

Sen. Copeland and Wagner of NY condemn charges by Rep. McFadden (R, Pa.) that governorship of the Fed. Reserve is being bartered in a patronage deal with Tammany Hall.

Attorney Gen. Mitchell issues temporary order against wiretapping by Federal prohibition agents, except where approved by chiefs of bureaus concerned.

Washington report: Silver stabilization situation confused; unclear what effect Senate resolution will have or what prospects are of Chinese silver loan. Struggle among Democrats seen on Prohibition position for 1932, though they're still expected to take wet side. Congress reluctant to appropriate full amount needed in worst case for veterans' bonus, since this would raise total appropriations above psychologically important $5B level. Congress reluctant to tackle postal deficit, but at $100M, or about a fifth of total Federal deficit, it must eventually be faced.

Editorial approving Dow Jones pres. H. Bancroft's analysis of obstacles to business recovery; continuing friction is slowing economic adjustment; however, clarifies that wage cuts are justified only where current "wage scales are an obstacle to marketing of product," not "merely to increase the net earnings of capital where these are already sufficient to sustain the business." Country is passing through a period of populism similar to that of the early Bryan period [1890's], caused now as then by economic depression. However, there's solid hope we'll emerge from it soon - "perhaps beginning about March 4." [when Congress adjourns]

Editorial seconding Cornell Prof. J. Boyle's call to strip the Farm Board of its powers of "merchant, speculator, and banker" and change it to an information agency.

Editorial by T. Woodlock: Australia's problems are due to excessive borrowing for govt. undertakings; per capita debt close to $900; about half of wage earners are employed by state or Commonwealth govts.; must now pay the piper in form of deflation; overspending on "schemes very doubtfully remunerative" only produces inflation and temporary prosperity that can't last; let this be a lesson to those in the US looking to public control to solve failings of private business.

South American leaders recommend goodwill tour by Lindbergh to offset gains in British prestige due to recent visit by Prince of Wales.

High cost of funerals often results in appeals to charity when a death occurs in a poor family. Social workers propose casket companies make available presentable pine caskets for $10 or less to alleviate the problem.

Some small communities in Minnesota and the Dakotas are attempting to stimulate payment of old bills and demonstrate value of putting money into circulation by handing out gigantic $10 checks. The recipients are supposed to endorse the check to pay an old bill; the payee in turn pays one of his old debts, and so on. In St. Cloud, Minn., 200 $10 checks were used to pay off $32,800 in old bills, with one of the checks endorsed 27 times.

Jobs are so scarce in some cities that unemployed people have started placing classified ads offering cash rewards for jobs.

54-story, 745-foot City Bank Farmers Trust building, located at William Street and Exchange Place, to open Feb. 24. Vaults to be guarded by most elaborate system of "electric sentinels" in the world, able to detect the slightest vibration caused by a "yeggman's hammer or an explosion of TNT"; system had to be tuned to avoid being triggered by subway. Building also contains world's largest switchboard of its kind, with 8,000 extension lines. Construction took about 8 months.

Market commentary:

Market wrap: Stocks worked gradually higher through the session in spite of several attempts to start reactions; advance was general, with leaders including US Steel pushing ahead and particular strength in coppers, companies linked to auto output, banks and trusts. Bond trading more active; US govts. dull, mostly firm; foreign mixed; corp. active and strong, particularly convertibles. Commodities mixed; grains strong; cotton off moderately. Copper demand good at 10 1/4 cents, further price rise seen likely.

Conservative observers advise taking profits in next two days on theory market may run into selling ahead of Monday holiday; however, continue to advise accumulating standard stocks on reactions.

Bulls encouraged by rise in copper price and higher steel production reported by Republic Steel, a supplier to automakers.

Public interest in the market has grown, particularly in the Midwest, as seen in trading volume and reports from brokers. The resulting renewed buying by outsiders has helped to absorb some profit taking in recent sessions.

Foreign trade figures for Jan. disappointing, showing poorest results in about 17 years; trade revival important for recovery. Steel production levels in the next few weeks should be of interest; last year production peaked about this time, rather than the usual "spring bulge"; this year, a more normal seasonal pattern is expected. Locomotive makers expected to show poor earnings this year due to very low unfilled orders.

Another article on the finer points of the increasingly popular fixed investment trusts [similar to ETF's], focusing on how the funds charge for maintenance over time. Calvin Bullock Co. believes managed investment trusts [similar to mutual funds] will make a comeback, but will have to adopt principles of British investment trusts, which never distribute trading profits and never pay out all earnings as dividends, thus building up large reserves.

Broad Street Gossip: A number of bull pools are operating, and many are being organized; some are targeting low-priced stocks on theory they will come back quickly when business turns up. Opinions differ on when the business upturn will come; optimists see a return to normal before end of summer, while others think it may take until early 1932; bears believe that, 1932 being a Presidential year, recovery won't take place until after the election. Opinions also differ on whether distribution of the veterans' bonus money will be bullish or bearish. One bullish development is the determination of major corporations including the Pennsylvania RR, AT&T, US Steel, and American Can to continue expanding: "Good managements know that the present depression is temporary and that their business is bound to grow. They pay more attention to the future than to the past."

Irving Fisher criticizes "dead hand" of long-term charitable endowments attempting to direct affairs of the living over an indefinite period; believes they too often become wasteful or harmful; cites trust established by Benjamin Franklin and recent $40M endowment by Milton Hershey.

E. Gruhl, North Amer. Co. VP, hits expensive govt. development projects as frequent economic failures, including Muscle Shoals; says Hoover Dam now economically obsolete due to tremendous supply of cheap natural gas in California.

S. Insull, utility leader, explains function of Insull Utility Investments and Corporation Securities affiliates: not formed to profit by trading, but to avoid losing control of utility companies under his management. Has much of his own fortune in the affiliates. Insull utilities have weathered depression well. Stockholder attendance at annual meeting was unusually large.

H. Childs of Clark, Childs & Co. confident on market outlook: "I am very bullish on this market, and do not believe that this strength is a flash in the pan ... the mistakes of 1930 have been avoided so far, and the action of the market shows great underlying strength."

Economic news and individual company reports:

Fed. Reserve reports money in circulation Feb. 18 down $34M to $4.560B, total Reserve Bank credit outstanding down $24M to $905M. Member banks in NY City report brokers' loans up $23M to $1.772B; loans on securities to non-brokers down $18M to $1.885B.

Rates on bankers' acceptances raised 1/8% on all maturities, to 1 1/2% - 1 7/8%.

Two more Bank of US directors testify they knew nothing of the bank's loans to subsidiaries, particularly real estate ones; one was Col A. Metz, former Congressman and NY State Comptroller.

Directors of the failed Bancokentucky sued for $37,578,966 for mismanagement.

Treasury financing requirements in the next few years will be very heavy; if bonus bill passes, $4B-$5B must be repaid or refinanced by end of 1932.

14 leading Rochester companies, including Eastman Kodak and Bausch & Lomb, adopt unemployment benefit plan based on reserve fund paid for by company, setting aside up to 2% of payroll annually; payments to start in 1933.

W. Atterbury, Pennsylvania RR pres., denies they have effective control of New England railroads, or that when previously questioned on the topic he had replied "What are you going to do about it?" Also denies Pennroad Corp. is a "flimsy and transparent device." [Pennroad was an investment affiliate of the Pennsylvania RR that bought stock in other rails.]

Dow average of 8 iron and steel products was $44.50/ton vs. $44.56 prev. week. Scrap prices irregular, with trends varying in different markets.

Cars financed in 1930 were 2.996M for $1.230B vs. 3.560M for $1.623B in 1929.

British drain of gold to France almost stopped in past week, but whether stoppage is "temporary or not is impossible to tell."

French tax collections in first 10 months of fiscal year were 39.4B francs, 880M over budget estimates but down 2.5B from prev. year.

Spanish pesetas continue strong as local market approves new Spanish govt.

Cuban exports to US in first 11 months of 1930 were $110.0M vs. $197.5M in 1929, and lowest since 1911.

Panama Canal tolls for Feb 1-15 were only $971,910, lowest for any fortnight since June 1927.

R. Dean, metallurgist at Bureau of Mines, says US manganese industry could supply domestic needs but has been shut down due to Russian dumping.

NY City to sell $100M bonds Mar. 4, mostly for transit and schools; coupon rate will be 4 1/4%.

Decisions of Florida courts in Sanford municipal bankruptcy case seen benefitting Florida municipal bondholders generally.

I.R.T. directors reportedly more favorable toward NY City transit unification plan.

Ford has increased work week at huge Rouge plant to 5 days from 3-day week that had been in effect several months. Auburn reports 3,371 cars shipped in first 45 days of 1931, vs. 2,343 in 1930 and 2,212 in 1929; over 7,000 unfilled orders on hand.

Companies reporting decent earnings: Nat'l Power & Light, Kansas City Pwr. & Light, Nepture Meter, Drug Inc., Cream of Wheat, American Ice, Consolidated Ice of Pittsburgh, North Amer. Oil, Bon Ami, Bower Roller Bearing, J.S. Young (licorice paste), Northam Warren (manicure specialties).

Theatre:

The Gang's All Here - Musical comedy involving bootlegging business, starring Ted Healy, directed by Oscar Hammerstein 2d. A good rough-house comedy, though "more suited to the taste of the men folks." Mr. Healy starts as Dr. Indian Ike Kelly but ends as Dr. T. Slocum Swink, psychoanalyst; "Baby Face" Martini's gang invades Nantucket with machine guns; lots of idle shooting, which "may get on the nerves of people who go to the theatre to hide away from the banging of the elevated." Show includes array of good-looking female dancers supported by large male chorus, and opulent, scenery with "complicated doo-dads ... manipulated like clockwork." However, show was stolen by NY debut of Hal LeRoy, an "unknown lanky youth in a white suit, all alone on the big stage to dance a few steps"; crowd stopped the show to demand several encores.

Joke:

Joe Cook [major Broadway star] reports complaining to a waitress because the bean soup didn't have beans in it. Her reply: "Well, we got cabinet pudding too, but you won't find Andrew Mellon in it." [cabinet pudding - a delicious-looking English molded bread pudding with dried fruit and custard].

Magistrate - And now, Murphy, give us your last address. Murphy - The cemetery?