February 23, 2010

Monday, February 23, 1931: Dow 191.32 +3.10 (1.6%)

Assorted historical stuff:

House agrees to expunge Rep. McFadden's sensational charges against Sen. Wagner and Copeland (D, NY) from the Congressional Record. McFadden had charged the Senators agreed to vote for E. Meyer as Fed. Reserve Gov. in exchange for NY Republicans dropping investigation of Tammany Hall corruption.

Washington report: Announcement of Pres. Hoover's vacation plans taken as conclusive evidence no extra session of Congress would be called; utilities rallied. Muscle Shoals fate uncertain. Congress will approve “compromise” plan in which govt. will try to negotiate a lease for the plants for the first year; in practice, this is unlikely and outright govt. operation would result. It seems increasingly probable but not certain that Pres. Hoover will veto the plan, and it would then be likely the House would sustain the veto. Fate of oil imports compromise uncertain. Administration likely to approve world silver conference called for by Senate.

French Deputy Bouilloux-Lafont defends proposed $258M Ministry of War budget, saying it's less than other nations and than pre-war level.

Editorial: Giving the ICC more authority (over rail holding companies) seems a losing idea, since it hasn't effectively used the powers it has to promote railroad unification under public control as envisioned in the Transportation Act of 1920.

Postoffice Dept. agrees with executives of 26 air mail lines on new formula for air mail rates allowing greater development of air passenger service. Dept. also suggests more uniform air passenger rates, which currently vary from 4 cents to 13 cents per mile in different parts of the country.

Pan American Airways prospects seem favorable; Postmaster Gen. Brown has implied their air mail routes should be profitable soon; company has long-term mail contracts and 20,000 miles of airways in operation; S. America seen as good field for developing air transport.

First telephone service between Santiago, Chile and London inaugurated.

One remnant of "Trust Buster" [Theodore] Roosevelt's era can still be found in a NY City financial district building - a hidden staircase winding down from the executive offices to the basement. This allowed company executives, when a process server called, to discreetly exit their offices and blend into the crowds outside.

Market commentary:

Market wrap: Stocks rallied broadly across almost all groups; substantial selling to take profits ahead of the long weekend was easily absorbed; many new yearly highs; major industrials led the advance; trading favorites rallied vigorously. Bond trading more active, cheerful; US govts. dull, steady; foreign mostly steady, with sharp rally in Australian; corp. firm, speculative issues continue rally. Commodities mixed; grains down substantially; cotton up slightly. Silver up to 27 1/4 cents.

Week in review: Stocks up strongly; Dow now up about 20% from Dec. lows. Bond trading quieter, but prices surprisingly steady in spite of the veterans' bonus; corp. speculative and convertibles rallied sharply. Money market showed some signs of firming, as rates on bankers acceptances rose. Foreign currencies irregular. Sterling continued weakening following Chancellor Snowden's "economy speech"; increase in Bank of England's 3% rate was rumored, as resumption of gold drain appeared possible, though seasonal strengthening is likely soon. Marks held well, while pesetas rallied following change in Spanish govt. Silver hit a new record low at 25 3/4 cents early in the week, then appeared to steady. Steel continued gradual improvement, with production rising over 50% and good automotive demand, but buying remained cautious. Grain prices moved in a narrow range, declining to start the week but firming to end it. Cotton rallied early in the week, then gave up most of its gains.

Bears maintained the rally had outpaced mild improvement in business and pointed to the false rally in early 1930, while bulls cited tremendous reduction in speculation and pointed to 1921 as a better analogy that would suggest bottom has roughly been hit and current rally is likely to persist for some time. Market has already passed through a tremendous readjustment; the bear period has lasted for most of the time taken by memorable bear swings of the past, and on a percentage basis has already exceeded any of them.

Conservative observers continue to advise accumulating standard stocks on technical reactions; advise using stop-loss orders for protection. A considerable pool of buyers now seen underlying the market, consisting of bulls who sold out on the upswing and are anxious to rebuy.

Strong spots included auto-related companies, coppers, American Can, Goodyear, and Auburn; rails joined the rally late in the session, further encouraging bulls.

Industry sentiment said better thanks to gradual business improvement in past 6 weeks; stock market rally has also helped.

Bulls encouraged by recent pattern of declining volume on setbacks. Bears said to be active in US Steel, arguing it won't earn its dividends in the first half. Bull pools are said operating in Vanadium, A.M. Byers, and Tubize Chantillon B. Recent movements in trading favorites seem to have been caused by unfounded rumors spreading around the country, judging by inquiries at leading brokers. This is normally a sign of pool manipulation.

Recent market uptrend said driven partly by large short position and increased public buying, particularly of trading favorites.

Broad Street Gossip: Idle cash is piling up at many corporations, and may soon be put to more productive use; “Never before was industry in a stronger cash and inventory position at the end of a depression - that is, if the current depression ... is at an end or close to it.” Brokers report many new accounts, particularly from the interior; many who left the market after the declines last fall are back again. Over the past three weeks, bull tips have suddenly become profitable again.

Editorial: Break in cotton prices at end of the week may be a warning signal. While a reaction would be expected after the strong recent rally, the fundamentals don't look good; consumption will probably decline this year, while farmers and weather may combine to increase supply.

J. Bunting, presiding at tea-brokers meeting in London, says tea trade nearer ruin than ever thanks to "antediluvian marketing" and ill-advised Russian deal.

Curiously, in spite of all the ill effects thought to follow the veterans' bonus, the market has rallied almost in time with the progress of the bonus over the past few days. Possibly the market had discounted a bigger version of the bill. It's also true that, while increase in the public debt would be unfortunate, a new issue of $1.5B would only restore the debt to its level of June 1928, when business and stocks were rallying. Adjournment of Congress March 4 may also be cheering the market.

Economic news and individual company reports:

F.W. Dodge predicts Feb. likely to show first year-over-year increase in residential building since Aug. 1928, based on first 15 days.

Chicago having trouble restarting tax collections after long delay due to legal disputes; 1929 tax bills may not be sent out in time for citizens to pay by April 1, in which case they would be officially delinquent.

Oklahoma Gov. Murray starts investigation of possible discrimination in applying oil production curtailment in Oklahoma city field. Champlin Oil says intends to appeal case against curtailment to US Supreme Court if necessary. 110 test wells under way in new East Texas oil area; at least 50 more expected within a week.

Fisher's wholesale commodity index declined for 11th week in a row, to 75.8 for week of Feb. 20, vs. 80.7 for week of Dec. 5. BLS reports wholesale price index of 550 commodities was 77.0 in Jan. vs. 78.4 in Dec. and 93.4 in Jan. 1930; retail food price index 132.8 vs. 137.2 and 155.4.

Youngstown district steel production to remain at 50% this week.

Commerce Dept. reports outstanding feature of 1930 exports was rise of machinery exports to first place in value, displacing raw cotton due to price decline.

Countries with most dollar bond issues outstanding in US, excluding Canada: Germany, $1.190B; Argentina, $450M; Japan, $423.4M; Brazil, $367M.

World copper production in Jan. was 129,390 tons vs. 136,252 in Dec. and 157,548 in Jan. 1930.

Romanian oil prices plunge 50% after breakdown of curtailment agreement; all producers there are losing money; crisis also developing in Polish industry.

Possible liabilities of Canadian provincial govts. for guarantees on 1929 wheat crop placed at $23M.

Italian wheat crop said progressing well; a successful crop would aid the Fascist govt's objective of reducing trade deficit and making Italy self-supporting.

Spain restricts exports and short sales of peseta currency.

Average speed of freight trains in 1930 was a record high 13.8 mph.

American Tobacco (makers of Lucky Strike cigarettes) expected to raise dividend this year based on higher earnings.

R.C.A. Communications (worldwide radio network) handled 58M paid words in 1929 vs. 45M in 1928 and 38M in 1927.

Companies reporting decent earnings: Loose-Wiles Biscuit, Brooklyn-Manhattan Transit, Parker Rust-Proof, Buckeye Pipe Line.

Music:

Talkies have been credited - and blamed - for many things. Currently, in Paris, they can be credited for revival of the “picturesque old calling of minstrelsy,” but blamed for making it more commercial. In the old Paris days of the cafes chantants, unknown poets and composers could create a vogue with a topical song, which could spread from the cafes to the theatres, giving the song writer fame though seldom fortune. By contrast, successful US popular songwriters have reaped rich rewards since the 1840's and 50's, and this has been greatly increased by the talkies, which can expose a song to an audience of millions, leading to sales in the hundreds of thousands of copies and making millionaires of some composers. The Paris equivalent of “tin-pan-alley” took notice, particularly of the dizzying sums of money raked in by The Singing Fool, as Al Jolson's “Mammy” echoed from French movie screens. The French topical song and street singer are now back with a vengeance; a few of the street musicians write their own songs, but most learn the latest native hit; some are said to earn 500 francs a day selling copies.

Washington's Birthday special:

Little-known account of how George Washington lost a birthday: Prior to 1752, England, and therefore the colonies, used the Julian calendar in which the new year began March 25 [the Julian ordering is still evident in Sept-ember, Oct-ober, etc.]. When Parliament switched to the Gregorian calendar, it by law made 1751 end on Dec. 31 instead of March 24, and the year 1752 start the next day with Jan. 1. Thus, 1751 lost the days from Jan. 1 - Mar. 24, and those including Washington who were born in those months skipped a birthday. [Note - the complete story is a bit more complicated.]

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