February 21, 2010

Saturday, February 21, 1931: Dow 188.22 +3.76 (2.0%)

Assorted historical stuff:

Pres. Hoover reports over 450,000 will be at work on govt. projects within a month, vs. 150,000 before the depression.

Rather bitter editorial concerning Sen. Norris' victory in the 10-year struggle over Muscle Shoals [compromise appears set to be approved by House and Senate]. It now appears the supposed function of the project as a yardstick for measuring fair power rates is doubtful; the real objective appears to be putting the government in the fertilizer business; this endeavor is likely to fail, so the net effect will for the Federal govt. to use an investment of $150M and its taxing power to supply a small part of the country with electricity that may or may not be cheaper than what they could get from other sources.

Washington report: Pres. Hoover says will act on veterans' bonus by middle of next week; veto expected. Arrangements going forward to enable Pres. Hoover to take a long-delayed vacation; dates not yet set. Change in Congressional reapportionment unlikely; Western and Southern states with low alien populations had sought a Constitutional amendment excluding aliens from the count dictating representation in Congress, while large Eastern states had sought to exclude people barred from voting; this was aimed at the black Southern population. Compromise apparently reached on oil legislation, may be enacted this session; will put tariff of over $1/barrel on imported oil over quota set proportionally to domestic production.

J. Parmentier, French economist, says Russian five-year plan already 75%-80% successful; predicts within a few years it will be in position to launch economic offensive capable of ruining countries such as Germany and Britain that depend largely on export trade.

International bankers meeting in Paris minimize gold problem as cause of depression, believe it can be solved with long-term credits.

French coal mines attempt a price cut, becoming first important French industry to do so. Unions in North vote general strike starting March 10.

Peruvian govt. declares martial law in Lima after group of 60 armed men tries to sieze Presidential palace; outbreak blamed on followers of deposed Pres. Legula.

Dow Jones news ticker operates with a speed the casual observer doesn't appreciate; time from reporters being informed of the NY bank rate until it comes across the ticker is less than 15 seconds, while a recent court decision in London appeared on the ticker 17 minutes after a cablegram on the decision was filed in London.

San Francisco Bay is home to one of the oldest industries: salt, produced elsewhere by mining, is there extracted from seawater by evaporation in shallow beds.

Columbia University annual budget increased from $820,900 in 1900 to $11.5M last year, while enrollment increased from 4,400 to 51,600; share of expenses paid by students declined from 49% to 38%.

Market commentary:

Market wrap: Stocks continued strong, with new yearly highs in almost all major industrials; public utilities, banks and trusts also strong; profit-taking increased toward the close but was absorbed easily. Bond trading quieter; US govts. dull, steady; foreign mostly steady to firm, German reach new yearly highs; corp. mostly higher with particular strength in convertibles. Commodities weak; grains mostly off; cotton down sharply. Copper remained at 10 1/4 cents. Silver market seen stabilizing as Indian inquiry increases.

Conservative observers cautiously optimistic; recommend postponing new buying until Tuesday in case of unforeseen developments over the holiday weekend; if nothing new develops, recommend buying good stocks on minor recessions and holding until "market itself indicates a change in the trend."

Banks and trusts had one of the most active trading days in months; rumors of mergers in the air, with City and Chemical particularly active.

Market strength attributed to short-covering and renewed outside buying; late profit-taking attributed to traders closing out before leaving for holiday weekend.

London stocks were down on the week on widespread nervousness over national finances; London raised open market rates to defend sterling.

Increase in brokers' loans of $23M (1.31%) was considerably smaller than expected in view of recent market rally. Buyers in recent days are using stop-loss orders for protection, as advised by brokers and conservative observers. Stop-loss prices have been moved up to follow the market, so a good reaction might trigger a number of them. Utilities said to be increasingly popular with investment trusts.

Municipals easier after announcement of $100M NY City bond sale; Dow average yield of 20 long-term state and city bonds is 4.01% vs. 3.92% on Jan. 23.

Increase in automotive operations appears to be spreading to truck and bus makers; orders are up at accessory companies.

Broad Street Gossip: The stock market has looked like a bull over the past week or two, with the Dow up 26.77 from the year's lows. However, it's about where it was in early Feb. 1930, and still 192.95 points off the 1929 high. Letter to a broker from customer in Gary, Ind.: "I would like to buy some kind of a stock selling between $20 and $30 a share and paying $4 a share annually if you can assure me that the present dividend is safe." [Note: The funny part is, this was probably doable ... ]

A.&P. stock is up over 50 points this year, to 221; earnings report expected to compare well to 1929. Goldman-Sachs Trading Corp. (investment affiliate of Goldman Sachs) hit a new yearly high above 8; liquidation value was $12.40 at year-end and has gone up considerably since.

Editorial: At first glance, getting anything good out of Bradstreet's report of Jan. construction seems like "getting honey from a rock"; permits in 186 cities were down to $90.7M vs. $106.9M in Dec. and $110.6M in Jan. 1930. However, permits in NY City were $33.5M vs. $27.6M and $29.6M; "It may be suggested ... that a city that is the center of the country's commerce and finance would be the first to feel an approaching improvement."

B. Anderson, Chase Nat'l Bank economist, disagrees with recent report of League of Nations gold committee blaming much of depression on gold shortages; says deflation has already postponed any serious shortage for a number of years; criticizes proposals for expanding credit as excessive and harmful; believes fundamental solution to gold maldistribution is freer trade through reduction of tariffs and other trade restrictions.

W. Atterbury, Pennsylvania RR pres.: "I am hopeful we have rounded the turn"; sees signs of improvement in carloadings, steel and auto industries.

Economic news and individual company reports:

Another Bank of US director, J. Gilchrist, testifies he personally knew nothing of the bank's affairs, and did practically nothing to find out what was going on in the bank other than attend directors' meetings. Litigation ongoing regarding bank pres. B. Marcus' arrest for refusing to testify. Executive VP S. Singer was called, but invoked his right against self-incrimination and only answered a few questions.

Fed. Reserve Feb. bulletin notes increased demand for currency in past 15 months, particularly following Bank of US failure; currency in circulation at end of Jan. was $100M over Oct., while ordinarily the total declines $150M-$200M in that period. Also noteworthy was a large decline in credit extended; over the past 15 months, outstanding bank credit declined by $3B, reflecting lower business activity; security loans by non-bankers to brokers and dealers declined $5.5B.

Jan. internal revenue collections were $77.7B vs. $84.6M in 1930; 7 months ended Jan. $1.474B vs. $1.588B.

W. Splawn, House Interstate Commerce Committee counsel, urges strong action on rail holding companies, including extension of ICC authority to include them, Congressional consideration of legislation to deal with past actions by them, and Congressional investigation of all existing ones involved in interstate commerce. Particular attention was called to holdings of the Van Sweringen brothers and to the Pennroad Corp. holding co. affiliate of the Pennsylvania RR. [Note: Rail holding cos. bought stock in railroads and so apparently may have allowed gaining control or influence over rails without needing ICC approval.]

Western rails renew plea to ICC to reconsider drastic reductions on grain rates; with revenues already down sharply, having difficulty raising needed capital; unable to absorb further large revenue loss.

Bradstreet's weekly review: encouraging reports in many basic lines, though wholesale and retail trade mostly marking time; large distributors doing fair volume through price-cutting, but small retailers hurting. Dun's reports better sentiment; improvement in business fundamentals is clearer but still slow and uneven.

Standard Oil NY cut tank-wagon gasoline prices 1 cent/gallon throughout NY and New England territory, to 13.3 - 13.5 cents; other cos. matched the cut.

Cigarette production in Jan. was 9.368B, up 693M from Dec. but down 840M from Jan. 1930. Lucky Strike sales in Jan. were up 246M over Jan. 1930, which in turn showed a 698M increase over Jan. 1929.

NJ State Banking Commissioner endorses bill to raise limit on small-loan interest rate from 1.5%/month to 2.5%, saying small-loan brokers may be driven out of business by current limit.

Rail equipment prospects appear poor; there's little inquiry going on for new equipment; orders booked or under inquiry are low and probably won't allow most equipment makers to show profits in the first half. Some dividends may be in danger in spite of generally strong financial positions.

Manchester cotton market improved after settlement of labor dispute; inquiries much better.

NYSE seat sold for $300,000, up $5,000 from previous sale.

Company reports since Jan. 1: 143 companies reported higher earnings vs. 1930 and 511 lower; 598 dividends unchanged, 33 increased, 113 cut.

Companies reporting decent earnings: Houston Oil, Dominion Stores.


The Great Barrington- Satirical comedy about dubious origin of a distinguished NY family now in its twelfth generation. Prescott Barrington the First is revealed as an English servant originally named Higgins who absconded with his master's wife and jewels; arriving in America about 1630, he took his master's name and knighted himself. It turns out the family estate on the Hudson originated when Peter van Doorn, its first owner, gave it to Higgins AKA Prescott in return for marrying his servant Phoebe, who was pregnant with Peter's child. Higgins then drowned Peter and killed two other men as precautionary measures; two of the corpses were pinned to the wall of a secret cabinet with a sabre, where they are discovered by a latter-day Barrington as literal skeletons in the family closet.


Rango - "Beautifully photographed, authentic" film drama of tiger hunters in Sumatran jungle; "The outstanding actors in the film are the two orang-utangs, who at times vie with Charlie Chaplin as experts in comic pantomime."


Very rich lady's will: "And to my nephew Percy, for his kindness in calling every week to feed my darling goldfish, I leave my darling goldfish."

Judge - But how could you marry a known burglar? Witness - Well, he was so quiet around the house.

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