February 7, 2010

Saturday, February 7, 1931: Dow 169.88 +0.50 (0.3%)

Assorted historical stuff:

Glass committee seen likely to curb security "loans for others" made through banks for corporations and individuals. These loans have not been defended by a single witness in three weeks of hearings, and have drawn some harsh condemnation as the main factor taking speculative inflation to the heights it reached.

Bank of US bankruptcy hearing receives testimony that the executive committee never questioned a loan if the recipient was a bank affiliate, while loans to non-affiliates were investigated thoroughly. B. Marcus, pres., and S. Singer, executive VP, continue suit to disqualify M. Steuer as head of joint state/county investigation.

Washington report: Administration leaders deny reports circulating of a compromise on the veterans' bonus; issue has been discussed with some Republican members but no agreement reached; concern remains that any agreement would be "amended out of all reason." Senate and House leaders reach tentative compromise for $20M loan program to provide drought relief that may be used for food or other necessities. House has been chafing under its rule that no member can mention any Senator during debate; this has prevented members from replying to a recent "carnival of denunciation" in the Senate. However, House has gained prestige due to its more businesslike and temperate nature; "One Senate is enough."

Editorial: Owen Young's recommendation that all commercial banks be unified under Federal control would be desirable; as Mr. Young pointed out, the past few years have shown the superior strength of banks in the national system; over 80% of the 7,000 banks that failed in the past 10 years were state banks, not Fed. Reserve member banks. However, it may not be possible to impose this by law due to states' rights issues; it would probably be better to allow the process to happen naturally as the public becomes aware of the value of Fed. Reserve membership. Member banks should be allowed to establish branches in rural areas; there's much to be said for the Canadian branch banking system, which has a uniform countrywide law and has had far fewer bank failures.

Editorial: Report of the Senate special counsel against Eastern rail consolidation isn't that surprising considering Sen. Couzens' opposition. However, the arguments in the report are 10 years behind the times; most of the dozen or so objections in the report have been resolved in favor of consolidation; one possible exception is the effect on labor, but proponents of the plan have agreed that no men should be laid off because of the mergers.

British Chancellor Snowden denied rumors of a new unemployment relief loan: "My financial orthodoxy is still in a state of virginity." Lord Newton makes unexpected attack on Soviet Union in House of Lords; charges it's spending more on arms than any other power, probably $1B; “it is a perfectly stupefying figure.”

Construction of St. Lawrence waterway for ocean-going ships agreed on after visit of Canadian PM Bennett to Washington.

Railroads have finally arrived at a more reliable method of communication between front and rear cars of long freight trains than the current whistle - low powered radio transmitters are to be installed in each car, allowing signalling by a simple switch.

P. Litchfield, Goodyear-Zeppelin pres.says if McNary-Parker bill awarding airmail contracts to airships is passed, a trans-oceanic service between US and Europe will operate regularly by 1934; points out that 11 of 12 attempted trans-Atlantic dirigible flights have been successful, and no loss of life or injury was suffered.

NY State Sen. W. Lathrop protests continuation of one-man trolley car operation in Brooklyn, cites "tremendous wave of resentment against this penny-wise and pound-foolish false economy."

Moslem mine workers in Southern Bulgaria are on strike after owners refused to give them five half-hour breaks daily for prayers. The miners are from the Pomak tribe, which originally converted to Islam when Bulgaria was under Turkish control. Now, however, the tribe is stricter than the Turks themselves, refusing to accept the reforms of Kemal; men still wear the fez, women the veil, and they still use the old Arabic script.

Market commentary:

Market wrap: Stocks stronger; leading shares were up moderately, while trading favorites had some good advances as bull pools resumed activities. Bond market moderately active; US govts. continue rally; foreign steady, German strong; corp. generally steady. Weak tone in commodities; grains and cotton mostly close narrowly lower; corn up slightly; cocoa declined to new record low of 5.09 cents/pound. Silver declined 5/8 cent to new record low of 26 1/2 cents. Better demand seen for copper at 9 1/2 cents, raising hopes bottom has been reached.

Conservative observers were impressed by lack of liquidation after Thursday's break, but still inclined to wait for market to break out of its recent trading range.

Market strong spots included mail order shares, local tractions (mass transit cos., on improved unification prospects), US Pipe & Foundry, and trading favorites Auburn, Worthington, and Diamond Match [Kreuger-associated].

Market value of all NYSE-listed shares on Feb. 1 was $52.062B vs. $49.020B on Jan. 1.

Stocks in Berlin have had their first substantial rally in several months, and capital flight has eased. Earnings reports were not as bad as expected, and optimism has increased after reopening of the Reichstag, presentation of the budget, and Breuning statements on maintaining reparations and possible end to semi-dictatorship.

Investment trusts (similar to mutual funds and ETF's) have been buying in recent sessions; this has been a factor in stopping reactions over the past few weeks.

Rail freight loadings are considered an accurate measure of business activity. Some time ago, optimistic predictions had been heard that loadings in the first quarter would only about 5% below the 1930 level; however, so far this year the average decline has been about 16%. Rail earnings estimates are being revised down, accounting for some recent profit-taking in rail shares.

16 leading NY City banks are selling at an average of 18 times earnings, 1.5 times book value, and yield of 4%. Leading utilities are selling at 18-20 times earnings.

A copper mining man recently tried to interest the head of a copper co. in a big new prospect. "Not as long as I can buy them on the Stock Exchange for 25 cents on the dollar," replied the executive.

Broad Street Gossip: Some are encouraged by higher Jan. sales at several chain store cos. (Woolworth, Kresge, Kress, Grant). However, executives of the chains are reserving judgement; much of the improvement is in the Midwest, where auto and steel production is rising, but it's uncertain how long that improvement will last; a similar spurt last August dissolved into deeper depression. Many steel producers believe production will hit 65% before start of summer. Head of one of the largest banking groups believes buyers are now in a safer position than short sellers; liquidation is practically over, and stocks sold short to put the market down must be bought back. GM earnings of $3.25/share satisfactory for a very poor auto year; diversification into non-auto lines helped maintain earnings.

Sen. McKellar (D, Tenn.) charges Farm Board cotton operations a miserable failure; Board merely reorganized cotton cooperatives which previously had failed.

National tax conference convened by Amer. Farm Bureau; speakers agree total annual bill of $13B for Federal, state, and local taxes, growing $500M a year, demands serious attention; seeks to awaken public interest in “good government from the viewpoint of the pocketbook.”

Gen. W. Atterbury, Pennsylvania RR pres., believes business near bottom; improvement off bottom likely to be gradual as in the past, and may not be reflected in car loadings for some time.

Economic news and individual company reports:

Rates on NY bankers' acceptances cut 1/8% to record lows of 1 1/4% - 1 3/8% for 30-90 days; demand for short-term investments is very heavy as banks and institutions are building up liquid funds.

New bond offerings in Jan. were $602.4M vs. $125.7M in Dec. (low for 1930) and $624.8M in Jan. 1930; utilities accounted for 46.9%, rails for 17.4%. However, new bonds in the past week were down sharply to $21.3M as veterans' bonus unsettled the market.

US new car registrations in Dec. were 96,054, up 3.2% from Nov. but down 30.7% from Dec. 1929; full year was 2.626M, down 32.3%.

Jan. steel output averaged 91,971 tons (45.94% of capacity) per working day vs. 77,222 (38.57%) in Dec. and 140,596 (70.22%) in Jan. 1930.

Bradstreet's and Dun's weekly reviews report retail trade slow due to unseasonably warm weather in US interior, but note some gains in wholesale as spring merchandising season approaches; some irregularity seen due to impaired buying power in many sections.

A rather stunning chart appears on pg. 4 outlining the inter-relations of 23 public utility holding companies (see small image at right).

Worldwide crude oil production in 1930 was 1.408B barrels vs. 1.478B in 1929 and 1.322B in 1928; US production was 897M vs. 1.007B.

Manchester cotton market reports a fair amount of business despite labor troubles in Lancashire; a steady turnover is taking place with India despite Gandhi's desire for continued boycott of foreign cloth.

Gasoline in Youngstown district cut to 15 cents/gallon (including 4-cent state tax), lowest since 1911; unclear if action is temporary price war. Tank car gasoline expected to be raised 1 cent/gallon on the Atlantic Coast to 8 - 8.25 Cents.

Number of persons in US whose lives are insured for over $1M has grown from 58 in 1923 to 323 in 1930.

C.I.T. (largest independent financer of retail and wholesale installment sales) earnings held close to 1929 levels in spite of declining sales in almost all fields using installment selling; co. launched intensive campaign to diversify and increase number of customers.

Ford increases discounts to dealers from sliding scale of 17.5%-21% to a flat 22%; seen as move to strengthen dealers, particularly small ones.

Nat'l Cash Register 1930 net was about $3/share vs. $7.01 in 1929; co. has written inventory off conservatively and cut expenses steadily through the year.

Company reports since Jan. 1: 99 companies reported higher earnings vs. 1930 and 315 lower; 377 dividends unchanged, 24 increased, 78 cut.

Companies reporting decent earnings: Standard Brands, Amer. Gas & Elec., Hartford Elec. Light, Amer. Snuff, Consolidated Laundries.

Dance report:

Death of Anna Pavlova has revived interest in the ballet dancer. Paris idolized Pavlova from her first apperance in 1909 as a member of Diaghilev's company, until her last in 1928. Her death has provoked speculation on the future of dance. In the past decade, dancing has become one of the highest paid professions, "with honors and shekels going to the eccentric and the fleet of foot." Acrobatic dance teams have featured in European music halls and on Broadway, ballroom dancers have popularized nightclubs, and the black revue has circled the world and is now at the peak of popularity in Paris. By contrast, the ballet has declined, now restricted largely to opera houses. Years of intensive and competitive training are required, and the ballet career is relatively short; a dancer's pay is lower than that of "her cake-walking sister." The ranks of the ballet have thinned; "competition is now for the financial returns rather than for the bouquets of art."


"Smith - Did you ever write a tragedy? Dramatist - I did once, but I thought it was a comedy up to the night it was produced."

"'Had an addition to my family yesterday.' 'Congratulations. Boy or girl?' 'Neither. Wife's mother.'"

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