February 16, 2010

Monday, February 16, 1931: Dow 180.41 -0.58 (0.3%)

Assorted historical stuff:

Editorial: Congress, disappointingly, has gone beyond the reasonable Young veterans' bonus plan to limit the payout to $300M-$500M to veterans in need, and looks set to approve a plan with a likely payout of $700M and potential liability up to $1.350B. Economic recovery will be set back many months; funds must be found to cover not only this payout but a $500M deficit for the fiscal year ending in June. "Business must be prepared to take it on the nose." Compromise veteran's bonus seen likely to pass House today; Senate may pass it as is or a larger version. Pres. Hoover likely to veto the bonus; Congress then likely to override. Treasury Sec. Mellon says measure would require heavy new financing in next 28 months.

French unemployment is rising; govt. employment agency has 50,715 open requests for jobs. Labor unrest is increasing as trades affected by the slump try to cut wages 10%-20%; minor strikes are affecting most industries, and the govt. is cracking down on foreign labor after protests on its high level of usage.

Editorial: Senate's plan to stabilize silver in order to raise China's standard of living and improve trade is aimed at a worthy goal but doomed to failure. With leading commercial nations on a gold standard, silver is a commodity and, as for other commodities, efforts to control its price are likely to fail. "We had better leave silver, wheat, coffee, rubber and other commodities to find their natural level." Editorial by T. Woodlock reviewing some of the history of gold and silver, including the interesting fact that ratio of production in 1929 was almost the same as in 1873 (14 times as much silver as gold produced in 1873, 13 times in 1929) whereas ratio of value went from about 1.17 to over 3 (i.e. the gold produced in 1873 was worth only 17% more than the silver, but in 1929 was worth 3 times as much). Mr. Woodlock's explanation: "logically, or illogically, the world as a whole 40 years ago ceased to regard silver as money ..." Money must be something that can be exchanged for goods and services everywhere. Schemes to make things other than gold into money seem to rely on forcing others to take it, i.e. "legal tender."

Chancellor Snowden says was referring to domestic British war debts as curse, not to the US debt settlement arrived at by Baldwin.

On June 1, 1876, a special "Lighting Train" left Jersey City to set a coast-to-coast record. It arrived 81 hours later in San Francisco, an amazing feat only seven years after completion of the first transcontinental railroad. The coast-to-coast trip normally took a full week.

Sweden is becoming Americanized, most distinctly in Stockholm. Citizens there like US novels, magazines, and movies; typical slang expressions such as "All right, kid," "O.K.," "Hello, baby," "So long," and "Howdy" are frequently heard. Orange juice is served for breakfast, hot dogs are sold everywhere, and cigarettes are increasingly popular in hotels.

Bath Iron Works shipyards in Maine to launch 279-foot private yacht built for Eldridge Johnson, former Victor Talking Machines pres.

Estate of George Rudd of the Bronx appraised at $1.049M, bulk of it in cash on deposit at 66 different banks.

Story by H. Alloway about Ferdinand Ward, infamous for almost ruining Ulysses S. Grant [his partner in a brokerage that turned out to be a swindle]. Some still alive who knew Ward remember him agreeably. One recalls him as “the first Wall-Streeter I ever knew to go in for charts. He was just as glib about 'cycles' as are the patterers today.” Another says: “That he was evil dispositioned not one of us ever conceived ... not till jury evidence heaped higher than the Catskills.”

Market commentary:

Market wrap: Stocks opened short session with declines, but volume dropped and support came in. Market firmed at end of first hour; much of the list rallied; amusements and trading favorites were strong while leaders were steady to the close. Bond trading moderately active, prices irregular; US govts. dull, slightly lower; European firm; S. American irregular; corp. high grade firm, speculative dull, irregular. Commodities dull; grains mixed in narrow range; cotton down slightly.

Week in review: Stocks broke out of trading range; upswing was "so broad, and so well sustained that it was clearly due to something more basic than a temporary running-in of the shorts." Bank and trust stocks were relatively weak. Corp. bonds generally higher; US govts. irregular on veterans' bonus concerns; European govts. up mildly, S. American irregular. Money market rates may have hit bottom based on spring business activity and stock upturn; rates on bankers' acceptances were raised 1/8% at week-end, to 1 3/8% - 1 3/4%. Steel production continued uptrend, reaching 50% of capacity; however, improvement was small and uneven. Grains up sharply early in the week, then lost most of gains. Cotton rose steadily. Copper firmed to 10 cents. Foreign currencies highly irregular. Europeans started week strongly, but reversed sharply after Chancellor Snowden's "economy speech"; European stock markets also fell following the speech. Chinese currencies fell as silver declined to record lows. Spanish pesetas slumped on general strikes and political instability.

Market observers believe a larger technical reaction may take place, but advise using declines for accumulation of standard stocks. Most interests warn against taking the short side.

Observers encouraged by $33M gain in brokers' loans, only the second weekly gain since Sept.; seen as first tangible evidence public is returning to market. Wall Street professionals, however, remain skeptical as indicated by continued substantial short interest; almost 100 stocks continue to "loan flat."

Rail shares, which usually lag sharp advances in industrials and utilities, have instead outpaced them this year; the Dow 20-rail average has increased from 91.65 on Dec. 16 to 111.07 on Feb. 10. This gain came in spite of poor current earnings and carloading figures. Oil stocks haven't shared in the recent rally; it's rumored the new East Texas field may threaten the general oil price structure. Low-priced industrials have been attracting public buying according to a number of brokers. Rumors circulated widely of a new pool operating in Vanadium; stock has previously been subject of bear-bull contests.

Broad Street Gossip: Stocks have rallied substantially so far this year; the Dow gained 18.96 from the year's low to Saturday's close. However, this was still 200.76 points off the 1929 peak. Stocks have easily absorbed a lot of profit taking in the past few days; this is the type of market bulls like and bears dislike. Brokers who loan stocks out report short interest remains large; considerable short covering has taken place, but new short sellers are coming in on advances.

Very low interest rates considered encouraging for stocks. History of trade cycles in past 50 years shows bottom has almost always been hit when rates were very low; also, dividend yields substantially above money market rates should spur investment demand.

Rep. McFadden (R, Penn.) accuses international bankers of planning to foist $300M in Cuban bonds on unsuspecting Americans, using State Dept. as cats-paws.

Argentine Fin. Min. Perez says believes worst of economic depression already past.

H. Blythe, Goodyear VP, believes recovery from depression began in Oct.

Evangeline Booth, Salvation Army Commander, says number of jobless being fed daily has declined to 35,000 from 50,000 in past few weeks, indicating country has passed the unemployment crisis.

Col. L. Ayres, Cleveland Trust VP, points to Jan. upturns in business indexes as important indications we're “at or near the bottom of this depression”; unsure if strong spring recovery will develop; this should become evident within 6 weeks; past history indicates slow period for some months.

Economic news and individual company reports:

Car production has improved considerably from start of year, though still well below 1930; further moderate gains expected. Encouraging gain in public demand for new cars is reported. Total US and Canada Jan. production was about 184,000 cars, up 14% from Dec. but down 35% from Jan. 1930. GM sales to dealers in US and Canada in Jan. were 89,349 cars and trucks vs. 80,008 and 106,509.

US automotive exports in 1930 were $298.8M, down 47% from 1929; imports were $1.9M, down 46%.

BLS reports Jan. employment in 15 industrial groups down 4.2%, payrolls down 8.2%; decline called largely seasonal.

Steel buying improved in past week; many orders have been for early delivery, reflecting low inventories; auto demand is larger. Youngstown district production unchanged at 50% this week. Scrap market is irregular.

Fisher's wholesale commodity index declined for 10th week in a row, to 76.3 for week of Feb. 6, vs. 80.7 for week of Dec. 5.

US/Canadian newsprint production in Jan. was 289,866 tons vs. 284,031 in Dec. and 331,156 in Jan. 1930. US cotton consumption was 454,188 bales vs. 406,207 and 576,160. US tire shipments in Dec. were 3.361M, up 18.6% from Nov. and up 3.8% from Dec. 1929.

Class 1 rails 1930 net operating income was $885.0M, down 30.5% from 1929 and a return of 3.3% on property investment vs. 4.95% in 1929. Gross operating revenue was $5.343B, down 16% from 1929.

Crude oil price cuts expected in Oklahoma. Gasoline prices cut in Ohio.

Farm Board chair. Legge urges immediate 30% reduction in cotton acreage; says 1931 crop as large as previous two would drive cotton prices under 10 cents.

Directors of the closed Chelsea Bank submit final plan for reopening; depositors to be assured 100% of their money.

Net gain in deposits at 144 NY State savings banks in Jan. was over $95M vs. $25M in 1930 and $9M in 1929. Banks seen benefitting from Fed. easy money policy through lowered interest rates paid to depositors.

Article detailing the rather eye-opening series of expense charges that purchasers of fixed investment trusts (similar to ETF's) are subject to.

Herald Tribune reports US visitors to Europe were 403,000 in 1930 vs. 313,000 in 1929; visitors are spending less, and a larger proportion are visiting Germany.

Commerce Dept. reports number of movie theaters worldwide is 62,365, of which 22,731 are in US, 28,454 in Europe, and 4,954 in S. America.

Air express service announced between 16 Eastern cities, to be operated by prominent air lines together with Western Union. Lower rates indicate a drive to increase revenues from this source.

J.C. Penney 1930 net $2.88/share vs. $4.66. Great Northern Rwy. 1930 net $7.24/share vs. $10.31.

McKeesport Tin Plate appears to be first steel co. announcing gain in 1930 earnings vs. 1929; attributed to good can business.

Companies reporting decent earnings: Indiana Pipe Line, Tampa Electric, Great Lakes Dredge & Dock.

Theatre:

Hobo - "Composition in ten scenes about the knights of the road" including St. Louis Blackie, Ohio Slim, and K.C. Shorty.

Movie:

Trader Horn - First film to "reproduce, realistically the sounds of jungle life ... Some of the scenes were 'staged,' of course, ... but many of the most thrilling episodes were obtained on location, with the animals fighting over their kill and plunging through the jungle unmindful" of the cameras.

Joke:

"Motorist - Hey, it's pretty fortunate for you this happened in front of a doctor's house. Victim - Yeah - but I'm the doctor."

The engineer finally got the train up a very steep climb in the Rockies, and pulled into the station. 'Phew,' he said to the new brakeman, 'we sure had a hard time making it up, didn't we?' 'I'll say,' replied the brakeman, 'and we'd have slipped right back down that mountain if I hadn't kept the brakes on tight.'

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