February 28, 2010

Saturday, February 28, 1931: Dow 190.34 -1.89 (1.0%)

Assorted historical stuff:

Senate overrides veto of veterans' bonus, making it law. Pres. Hoover says will uphold law; notes that it will be an enormous administrative task probably taking months; asks veterans not in need to wait so those in need are given priority. Editorial: Now that Congress has passed the veterans' bonus in spite of Pres. Hoover's unassailable arguments, the country must make the best of it. A “civic and even a moral responsibility rests upon World War veterans as a whole” to limit their drawing of funds to what actual need dictates.

Rep. H. McGugin (R, Kan.) is first Republican Congressman to commit to voting for Democratic Rep. Garner for Speaker of the House.

Senate adopts resolution asking Agriculture Sec. Hyde why $20M drought relief fund hasn't been made available.

Washington report: Veterans' bonus, whether it costs $500M or $1B, is “a mere drop in the bucket” beside what might come next. Considering the Veterans' Administration already costs almost $1B a year, it's easy to predict what will happen to the taxpayer unless he immediately and strenuously defends himself against “the most tightly organized lobby” since the heyday of the Anti-Saloon League. Upcoming demands may include forgiving of interest and principal on loans, universal pensions, etc.; cost of these would be staggering. House Republican “bolters” who are now threatening to let Democrats lead the next House will have 9 months before the next session to reconsider. Constitutional Amendment ending lame duck session was passed by Congress, but ratification by 3/4 of states is in doubt.

Editorial: While the upcoming dissolution of the present Congress is in itself cause for making Mar. 4 "a gala day," it may just be a temporary respite. Dangerous bills will come up again in the next Congress, in particular some that could "destroy the present system" of marketing farm products by restricting commodity futures markets.

Press cables from Delhi, India report a delay by the British govt. in deciding on Gandhi's demands “has caused a distinct diminution of optimism concerning prospects for settlement of the national conflict.”

Midtown merchants and civic organizations meet with Mayor Walker to press for quick action on vehicular tunnel under Manhattan from 10th Ave to East River; visit inspired by rumored abandonment of project.

First edition of combined NY World-Telegram appears; employees who had sought to buy it unsure on further action.

NY Gov. Roosevelt restores $375,000 appropriation to prepare for Olympic winter games at Lake Placid next year.

The first auto shows were held at Madison Square Garden at the start of the century; demonstrations included obstacles and stunt races with speed limits of 9 mph, and an inclined plane set up on the floor to show hill climbing ability. There were 30 exhibitors, including Autocar, Buffalo Electric Carriage, Locomobile, Peerless, and Upton Machine [the only one I recognize is Peerless].

Engineers are constructing the Akron, new world's largest airship, for the Navy. Many new problems in aerodynamics being tackled, including transmission between 16 foot propellers and engines placed within the body of the ship, designed to allow the "prehensile" propellers to operate at any angle.

New Curtiss-Wright "Junior" light plane flies from St. Louis to NY using 36 gallons of gasoline to cover the 1,050 mile distance.

Market commentary:

Market wrap: Stocks had a back-and-forth session; opening was irregular, with bull traders switching quickly from one sector to another; after some correction in the first two hours, an uneven rally began, starting in major industrials and then spreading to trading favorites, utilities, and coppers. Toward the close, selling increased again and there were substantial reactions from the day's highs. Bond trading slowed; US govts. rallied sharply after early weakness to close up; foreign steady; corp. quiet, mostly steady.Commodities weak; grains down moderately; wheat rallied after early weakness to close slightly down; cotton off substantially. Copper remained at 10 1/4 cents, less probability of immediate advance seen.

Rally in the main industrials, rails, and utilities has now covered about as much ground, percentage wise, as that from Nov. 1929 to April 1930. Bears are warning the rally is overextended, but the false rally in early 1930 was accompanied by a rise of $946M in brokers' loans, while during this rally they have actually declined over $200M (in spite of the moderate $82M rise in the past 3 weeks); the current rally has clearly been caused almost entirely by outright buying.

Market observers growing more cautious; advise reducing long positions in order to rebuy at lower levels, “permitting the market to have its normal reaction, and then judge the immediate future by its action.” Late reaction was attributed to stop-loss orders being reached on the decline.

Group operations are spreading in low-priced stocks, with new bull pools organized almost daily; conservative observers have been valiantly trying to keep customers out of those stocks. Reports continue of large short positions in standard stocks; some of it may be new short-selling, but some may be longs selling “against strong boxes.” Based on current conditions in steel and other lines, earnings for the first quarter will make sad reading for many leading industrials, though they probably will be better than the second half of last year.

Leading utilities are now selling at an average of 19 times earnings, a strong recovery from the Dec. 16 low of 13.6 times.

Hundreds of annual meetings will be held in the next 3 months. One interesting item will be the shareholder lists that some big corps. like US Steel will publish; these are expected to show big financiers have held or added to holdings; they “as a rule, are buyers rather than sellers of good securities on drastic declines.”

Broad Street Gossip: One Old-Timer reports he went to a tennis match in Madison Square Garden two weeks ago, and there were 15,000 there; later, he went to a wrestling match there and found the S.R.O. sign out; he then had trouble getting decent tickets to a Broadway show. The subway is more crowded than a year ago, taxis have trouble fighting through traffic, and Atlantic City was all sold out last weekend. “If this is depression, what kind of times are we going to have when things get back to normal?” Many stocks remain 50%-80% lower than the 1929 peak; however, even if the market recovers to much higher levels, it will have substantial reactions in the meantime; “we have had many reactions in every major bull movement.” Better tone of bank stocks is helping sentiment; these are favorite investments for hundreds of thousands with relatively low incomes.

Further price cuts in West Coast gasoline seen likely; while retail was 20 1/2 cents/gallon before recent 2 cent cut, “bootleg” is available at 12 1/2 - 14 1/2 cents.

Some doubt seen on British attitude toward silver stabilization, since they may benefit less than the US.

R. Whitney, NYSE pres., says stock panic clearly demonstrates need for flexible margin requirements. Opposes artificial methods for stabilizing stocks such as closing exchanges; when liquidation becomes inevitable, best course is to let it burn itself out.

E. Fisher of Fairbanks & Morse says conditions now more favorable for developing export business than in 1921, when there were large losses on inventories and many business failures; loss of export values in 1930 largely explained by drastic drops in commodity prices.

Roy Young, Fed. Reserve of Phila. gov., says general US business conditions due for upswing; sees particular signs of vigor in textile industry.

Economic news and individual company reports:

AFL Pres. W. Green says first part of Feb. saw first reversal of rapid gain in unemployment since Oct.; reports from unions with 803,000 members show decline in unemployment of 0.7%. However, sees warning sign in Labor Dept. report of numerous wage cuts in Jan.

Western rail and ICC representatives attend all-day meeting on problems of Western rails; no definite conclusions reached, but committees appointed to look into various phases of the situation. Jan. earnings of first 50 reporting rails down 37% from 1930.

US oil exports declined about 20% in volume in Q4 vs. 1929; exports to Britain and Europe are down sharply due to competition from Rumania and Russia, which are severely undercutting US prices; immediate improvement unlikely. Railroads restrict freight shipments in East Texas due to enormous freight movement for development of new oil fields.

Bradstreet's and Dun's weekly reviews report gradual and slight gains in trade; inventories low; sentiment improved.

Bankruptcy hearing receives schedules listing assets of some large Bank of US affiliates; these consist largely of Bank of US stock and securities and notes of other affiliates.

NY City Savings banks have been widely reducing rates paid on savings to 4%.

Farm Board had to reenter the wheat market for the first time in several weeks to prevent a break in the supported March wheat below 79 cents.

Call money renewal rate averaged 1.5% in Feb. vs. 1.716% in Jan. and 4.214% in Feb. 1930; lowest since 1908.

New bond offerings were only $20.0M in the holiday week, and have been moderate in Feb.; with settlement of the veterans' bonus and adjournment of Congress at hand, they're now expected to increase.

British balance of payments (sum of all payments including imports and exports, debt service, investments, etc) declined from surplus of 138M pounds in 1929 to 39M in 1930; this may have contributed to weakness in sterling.

G. Meyercord, Amer. Mfrs. Foreign Credit Underwriters pres., says almost no US export markets are in good condition from credit standpoint; many importers and foreign mfrs. struggling to deal with radically changed business conditions. Chile is only reasonably bright spot in S. America; Australia, New Zealand, and Far Eastern markets in difficulty. European credits bear close watching, with even France now encountering commercial failures; S. Africa a bright spot due to gold production but rest of Africa suffering. Nevertheless, optimistic on improvement in 1931, sees some signs already.

French Agriculture Min. Tardieu says Russia dumping flax and linen in French market at half price of domestic makers; promises quick action.

Gillette estimates 1930 combined earnings of $3.40/share vs. $4.44 in 1929; adopting some equipment and processes from the acquired Autostrop Safety Razor Co., which should reduce costs and improve quality.

International Salt reports record Jan.-Feb.sales; stock under accumulation by “banking interests sponsoring its market.” Product is mostly used in industry.

Company reports since Jan. 1: 167 companies reported higher earnings vs. 1930 and 626 lower; 638 dividends unchanged, 36 increased, 127 cut.

Companies reporting decent earnings: United Biscuit, Thompson-Starrett (construction), National Screen Service.


Pagliacci - Complete sound film of the opera, but "indifferently rendered by all participants, and from a cinematic standpoint it could hardly be worse." It's unfortunate that the first opera produced for the screen couldn't have been sung in English, possibly with Ramon Novarro as Canio and Lawrence Tibbett as Tonio.


The Husband - I'm enjoying Florence immensely. The Wife - Well, you can stay in Europe. I'm having a good time with Oscar.

The Wife - I found a very strange ticket in your desk today - it says 'Andy B, 8 to 1.' What does it mean? The Husband - Archaeological studies my dear - relics of a lost race.

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