February 19, 2010

Thursday, February 19, 1931: Dow 181.10 +1.55 (0.9%)

Assorted historical stuff:

[Note:That's crazy talk dept.] Needle Trade Workers union, a Communist organization, goes on strike with approval of Soviet Trades Union; demands 40-hour, 5-day week, minimum wage of $40/week, abolition of discrimination against black workers, and unemployment insurance.

Editorial: J. McHugh's criticism of tariffs as poor business is accurate. Import duties collected in first 11 months of 1930 were $455.4M, down about $100M from 1929; this decline will worsen, and must be made up by other taxes. Declines in exports will also reduce taxes due to lower profits. Tariffs can't be blamed for all the decline in trade, but probably caused some of it; with Federal revenues now decreasing and spending increasing, it's time to cut tariffs for simple business reasons.

Editorial praising Pennsylvania RR's decision to speed up $175M improvement program from 4 years to 2 1/2: "In taking this courageous step in the midst of a severe trade depression the Pennsylvania RR management evokes and reinvigorates one of the finest traditions of American railroading. It sets all industry an example of the highest value."

Washington report: With Congressional session drawing to a close, it's uncertain what can be enacted aside from appropriations bills and the veterans' bonus. Oil import legislation now seems unlikely, as does foreign farm embargo; 90% cut in immigration quota seems possible; Muscle Shoals and elimination of lame-duck session of Congress uncertain, awaiting Congressional votes. Senate takes up bonus today; Pres. Hoover sends statement repeating opposition, detailing likely heavy burden on Treasury. Supreme Court ruling on constitutionality of Prohibition anxiously awaited; Court has gone two days after hearing without ruling.

Editorial by T. Woodlock: Gov. Pinchot is mistaken in accusing power companies of "pyramiding, ... excessive charges and other devices ... adding many hundreds of millions of dollars a year to the cost of living of the people." This is clearly impossible; the total bill to home consumers in 1928 was only $605.9M. Mr. Pinchot's statement that power should never cost more than 5 cents/KWHr is absurd; even if power cost nothing to generate, this might not cover costs of distribution.

Agriculture Sec. Hyde says Dept. will "let no grass grow under its feet" in distributing food and clothing loans from $20M fund approved by Congress, but can't say definitely how soon the loans will be made.

Spain gets new Premier, J. Cabanas; to lead "monarchical concentration" govt.; Republican element may not be satisfied.

British coal mine owners demand wage cuts; general strike feared as result.

G. Davidson, Jewish Agricutural Society GM, says Jewish farmers of the US feeling effects of depression, but generally holding their own; puts Jewish farm population at over 80,000, operating 1M acres.

One of the greatest dangers aviators face is fog. This is the reason for "recent experiments in seeing through the opaque"; radio compasses are also being perfected to direct planes, and "television apparatus, which will penetrate anything, is among the possibilities of the future."

Shell Oil sets new world record for rotary drilling oil well at 9,680 feet.

Wall Street broker and banker walls hold some significant historical souvenirs, notably J.P. Morgan & Co.'s 1901 check for $23,127,016.07 for expenses of setting up US Steel, which was the largest check drawn in the US to that time.

Travellers returning from the "West Indies" [Caribbean] are bringing miniature yachts used by boys sailing out to meet ships. The mini-yachts hold one and can be floated in a bathtub, but have all the gear of a regular yacht.

Market commentary:

Market wrap: Stock trading quieter, in smaller range. Rallying developed early, with good recoveries in leaders including US Steel and GE; strength seen in utilities, coppers, and can companies. Rally met resistance in afternoon, with bears resuming operations and forcing setbacks from the day's highs; trading favorites including Auburn and J.I. Case were down sharply, but the general list drew good support. Bond market firmer after Senate appeared likely to approve House version of bonus unmodified; US govts. rallied; foreign mixed; corp. higher. Commodities mixed; grains mixed in narrow range; cotton up substantially, with all months selling above 11 cents for the first time since Nov. Copper no longer offered at 10 cents after good buying in past two days; increase to 10 1/4 cents expected.

Conservative observers favor profit taking on advances, believe stocks can be replaced at lower levels during technical setbacks; warn against going short.

Market rise can't be attributed to recent business news, but seems to be discounting future developments. If business doesn't recover, bears who stick it out will profit. However, conservatives say the bulls have the best odds: "It will not be many months before we will have had two years of depression, and few recessions of the past have lasted more than two years." Business should improve as spring approaches; what happens after that will be crucial.

Bankers said preparing to offer new securities in near future, leading to belief they will favor the recent higher range of stocks to ensure a good reception.

Trust Companies Magazine prints reports from 48 state banking superintendents showing not a single dollar of trust or estate funds in care of trust companies has been lost due to bank failure, default, or malfeasance.

Broad Street Gossip: To the editor: Let's face the facts about Russian competition. In the US, wage earners get $4-$8/day, depending on skill; Russian workers get 20 cents/day. "Now, is the US or any other country going to permit a foreign country to dump products on its shores and sell them far below what the former can make them for, thus demoralizing its entire industrial structure?" A contrary view from H.L. Horton & Co.: Russia isn't a serious competitor for the US in anything but raw materials, and the US is increasingly becoming a manufacturing country; Russian success would turn it into a heavy consumer of finished products, benefiting the US. There's no actual overproduction of raw material; trouble is surplus can't be gotten to the people who need it; world needs better transportation systems; therefore recommend rail, auto, airplane and shipping stocks.

Hornblower & Weeks recommends Woolworth based on increased Jan. business vs. 1929; due to lower commodity prices, Woolworth is able to offer more items in the five and ten cent range than it has since the war; financial position is strong.

Henry Ford says international mind is country's greatest need now; "No people can be prosperous unless all are prosperous."

H. Bancroft, Dow Jones pres., discusses factors retarding business recovery. Cites "false economizing by those having no need to economize", tariffs, international war debts, artificial attempts at commodity price fixing, tax burden, resistance to wage cuts, and politicians. Hits schemes for restoring prosperity by govt. spending, particularly veterans' bonus: "The government has no money of its own. Every cent that the government appropriates is obtained from the people by taxation, which means by compulsion." Sustained recovery depends on people voluntarily spending their own money; Congress seems determined to cripple their ability to do so.

Economic news and individual company reports:

Money markets this week showed first signs of firmness since start of year; a rise in rates is expected.

Weekly steel reviews more cheerful due to continued gradual uptrend in production; while most buyers are still cautious, lines including tin plate, rail, and pipe have increased and automotive business has been strong; however, quickness of the automotive upturn has aroused some suspicion it may be "flash in the pan." Finished product price outlook uncertain; some products have been pressured, but strong efforts are underway to raise prices in some lines. Scrap markets also present a mixed picture. Machine tool sales declined slightly in Jan.

Bank of US investigation hears testimony from two directors confirming account that B. Marcus, pres., had deceived board in fall 1929 about results of banking department examination. Also confirm board was apparently kept in dark about loans to affiliates; G. Carr, director, attributed bank failure to "policy loans" given to affiliates, people within the bank, their friends, etc.

BLS reports retail food prices declined 14.66% in 15 months ended Dec. 15; every commodity declined except canned salmon.

Refineries ran at 61.9% in week ended Feb. 14; stocks of gasoline increased 402,000 barrels to 42.859M.

US electric output for week ended Feb. 14 was 1,676 GWHr, down 4.7% from 1930, vs. a 5.9% decline prev. week and 6.3% two weeks ago. It's hoped output will soon show increases vs. 1930 since we're approaching the time in 1930 when output fell sharply.

French foreign trade in Jan. declined to lowest level in several years, with imports at 3.8B francs and exports 2.6B.

S. McKelvie, Farm Board member, says Grain Stabilization Corp. now holds "as much as 100M bushels" of wheat as a result of operations.

Comments from companies that had bad years: Chicago & North Western Rwy.: extent of worldwide depression unexpected; territory experienced worst drought on record, continuing into winter; farmer buying also reduced due to commodity deflation; drastic rate readjustments looming; prudent to conserve cash. S.S. Kresge: look to improve results through internal expense cuts, lower inventories, slower expansion; encouraged by sales gains so far this year. Chrysler: have cut expenses by over 31% while keeping as many as possible employed; in strong financial condition; haven't deferred development of new models or maintenance.

Companies reporting decent earnings: North American (utility), Brooklyn Union Gas, Public Service of NJ, Long Island RR, McCrory Stores.


Topaze - comedy by Marcel Pagnol, presented in the original French at the Forty-ninth Street Theatre; "picture of a moralist to whom all the prizes of life are denied so long as he lives in fidelity to his code, but to whom, once he is forced unwittingly to become an opportunist, all things come, including the power of wealth, the recognition of his fellow men, and the favors of a beautiful woman."


"'Has your son's college education proved of any real value?' 'Yes, indeed. It's entirely cured mother of bragging about him.'"

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