February 5, 2010

Thursday, February 5, 1931: Dow 171.13 +1.42 (0.8%)

Assorted historical stuff:

Owen Young testifies before House Ways and Means Committee. Opposes veterans' bonus on grounds it would be economically risky; suggests compromise in which veterans would be allowed to borrow at low interest rates against their bonus certificates, on theory only those in need would do so. R. Stephenson, Amer. Bankers Assoc. pres., says bankers universally and unalterably opposed to bonus; believes stimulation would be temporary and delay business recovery.

Mr. Young also appears before Glass committee. Says widespread bank failures in relatively prosperous times not acceptable; recommends bringing all deposit-accepting commercial banks into single national system under federal law, by constitutional amendment if necessary; believes competition between states in liberalizing banking law has contributed to banking difficulties. Hits “loans for others” [on securities] as source of speculation, uncontrollable contingent liability for banks. Favors strict regulation of bank affiliates. Says he's not a 1932 Presidential candidate.

Pres. Hoover says won't compromise on opposition to $25M Federal food relief bill.

Twenty five leading companies employing total of several hundred thousand notify Welfare Council Coordinating Committee on Unemployment that they contemplate no reduction in current workforce.

Editorial: French announcement of $120M in loans is encouraging as sign it's starting to use its vast gold reserves; less positive is that the three countries chosen (Romania, Poland and Yugoslavia) are French military allies; this has evoked criticism in other countries. The US could lend powerful assistance to world trade by using its even larger reserves, though this must wait until the veterans' bonus is resolved; when it does so, it shouldn't follow the French example.

C. Wooley, Amer. Radiator chair., tells House Ways and Means committee construction business is being held back by lack of adequate funds for long-term mortgage bonds at low rates; says veterans' bonus would dry up market for these bonds. Estimates 1.5M of 4M workers in building trades out of work; believes revival just starting; number of homes for which contracts were awarded in Dec. was about the same as 1929, though 50% below 1926 - 1928.

Editorial noting decision of Standard Oil of NY to put administration of its pensions, disability and life insurance in hands of the Metropolitan Life Ins. Co. This is seen as giving authority to an "expert and responsible third party," thus avoiding "pitfalls into which to many pension plans conducted without scientific knowledge of insurance principles ... have run."

US Building & Loan League gives guideline of two years' salary as sound price to pay for a home.

China is considering various new names for its currency, now designated as "dollar Mex" since early exports of Mexican silver to China arrived in coin form that went directly into circulation. Possible names include Yuan, Kuo, Min, Tang, and Sun.

Japan is complaining that hordes of fur-bearing seals in the North Pacific have grown so numerous under shield of a 4-country protection treaty agreed in 1911, that they are causing major damage to Japanese fish populations; wants restriction on killing the seals relaxed.

Ford Motor denies abandonment of Brazil rubber plantation project; says work ahead of schedule, 3,500 acres of jungle cleared.

Sen. Wagner (R, NY) introduces bill to convert Governors Island into public aviation terminal.

New electric compass for piloting airplane successfully tested by GE at Schenectady. Combined with autopilot developed by Sperry Gyroscope, will relieve human pilot of all functions but landing and taking off.

Anton Flettner invents new motor truck combining two chassis, a forward one carrying driver and motor, and a second carrying freight.

Construction of world's largest non-rigid airship for US Navy to start in a few weeks; will be 200 feet long, 44 feet in diameter.

A modern Pullman (passenger) train car contains over 1 1/4 miles of electric wire, 1/2 mile of pipe, and a complete electric generating and storage plant.

Melville K. Packer retires after 48 years of service on the Pennsylvania Railroad; based on careful records, rode over 2M miles in the cab of a locomotive.

Market commentary:

Market wrap: Stocks mostly moved up on somewhat higher volume, but improvement was uneven in both standard stocks and trading favorites, with some issues including US Steel and NY Central failing to share in the advance. Bond trading volume not heavy, but prices were higher across the list, led by a strong rally in US govts. Commodities mixed; grains rallied early but ended moderately down; cotton up substantially. Copper offered by some producers at 9 1/2 cents, matching 1930 low and lowest since 1895; buying remains small. Silver market believed scraping bottom, at least for the time being.

Conservative observers still cautious, advise taking profits on rallies; many look for a technical setback since prices are near their highs of the year.

A number of active traders are concentrating in low-priced stocks, on theory they've been thoroughly liquidated already and will respond to new buying.

Short interest has reportedly been reduced moderately but consistently in recent sessions, particularly in trading favorites.

Talk has already started of probable first-quarter earnings; business in many lines hasn't improved as much as hoped for, particularly steel production.

US Steel still seen as market bellwether; action in past 2 weeks has been inconclusive, with stock moving in an unusually narrow range; a sizable short interest exists, but enough buying support has come in to check any sharp setbacks.

State and municipal bonds issued in Jan. were $47.6M vs. $92.2M in Jan. 1930, and lowest Jan. total since 1920; bidding was very strong.

Copper market observers say buying is very reluctant; when inquiries do appear, they're able to get a low price because of competition with second hand dealers.

Broad Street Gossip: An old tradition says never to sell a dull market; however, the current dull market hasn't given much profit on the buying side either. Upcoming quarterly earnings comparisons may look better than a year ago, since they will be against declining 1930 earnings. Production of some commodities has shown improvement, but no big rise in earnings can be looked for based on current prices of major products. Recent cement co. earnings have been much more favorable than other industries; with big construction work planned, cement companies may also do well this year.

Editorial by T. Woodlock praising as sound a proposal of ICC to replace extremely convoluted and lawsuit-prone railroad rate-setting method based on valuation with one based on giving rails adequate access to capital to maintain good service; also recommends repeal of convoluted recapture provision.

Goodbody & Co. say investment trust (similar to mutual funds and ETF's) buying has helped technical position of many stocks; due to high degree of concentration in certain stocks, 15%-25% of many popular stocks have been taken out of the market by the trusts.

Sir H. Cunliffe Owen, British Amer. Tobacco chair., cautious on economic outlook; believes depression hasn't yet run its course, not optimistic on business upturn this year. Sees US leading recovery when it comes. Company had exceptionally good 1930, but is now feeling effects of depression.

R. Stephenson, Amer. Bankers Assoc. pres., says low point of depression hit about Dec. 20, business on upgrade since; inventories low and buyers appear to be coming into market to replenish inventories; sees gradual recovery, becoming substantial in second half.

Economic news and individual company reports:

Steel production in week ended Monday was at 47% vs. 46% prev. week, 44.5% two weeks ago, 76% in 1930, and 85% in 1929. Weekly steel reviews disagreed on conditions, with Iron Age saying momentum was lost while Steel said tone was better than last week; both agreed changes were minor. Finished product prices were steady, but scrap prices weakened.

US electric output for week ended Jan. 31 was 1,687 GWHr, down 1.9% from prev. week, down 6.3% from 1930 and down 1.6% from 1929.

M. Steuer, at Bank of US inquiry, charges York Investing Corp., an affiliate, was set up expressly to loan money to bank officers. H. Pollock, bank director and counsel, says can't recall details leading up to borrowing of $8M from bank by three affiliates.

Midweek weather reports noted serious lack of subsoil and soil moisture in large areas of US and Canada, lack of normal snowfall in mountains and Great Plains.

US cigarette production in 1930 was 119.625B vs. 119.039B in 1929; snuff also increased while cigars and loose tobacco were down; internal revenue receipts from cigarette production were $358.947M vs. $357.206M.

Senate passes Davis bill requiring contractors to pay based on wage scale in local community.

ICC is expected to reject plans to link New England rails with large lines west of the Hudson on grounds this would reduce competition.

Brazilian Pres. G. Vargas outlines most thorough economic reform program in Brazil's history, including reforming central bank, stabilizing currency, developing national industries, and gradually solving overproduction of coffee.

Higher bill rates due to energetic Bank of England efforts are attracting foreign capital to London. Rumors the Bank may advance its rediscount rate from the current 3% [vs. 2% in NY] are generally discounted in informed quarters.

US flour production in 5 weeks ended Jan. 31 was 6.948M barrels vs. 7.161M a year ago.

Nat'l Retail Dry Goods Assoc. convention urges govt. to establish $1B sinking fund as reserve for lean years.

H. Walker, Amer. Steamship Owners Assoc. pres., says shipbuilding was only major US industry to substantially increase employment in 1930.

NYSE seat sold for $227,000, down $3,000 from previous sale.

Cadillac reports Jan. retail deliveries of 1,137 cars vs. 832 last year. W. Blees, Oakland Motor Car VP, reports sales running over 15% ahead of last year, indications of further increase before opening of spring selling season; car shortages reported by some dealers.

F.W. Woolworth reports markedly improves business trend in Jan.; sales were $19.240M, up 4.5% from 1930; sales at old stores were up 2.67% vs. a rise of 0.38% in Jan. 1930.

Caterpillar 1930 net was $4.63/share vs. $6.16 in 1929; showing considered satisfactory in depression year. NY Central 1930 net was about $7.20/share vs. $16.88. GM 1930 net was $3.25/share vs. $5.49.

Companies reporting decent earnings: Public Service of Northern Ill., McGraw-Hill, Gulf Coast Lines, George W. Helme (snuff).


Seas Beneath - a Fox film, directed by John Ford. Story of US "mystery ship" sent out during the war to sink U-boats; members of crew leave ship in pretend panic when submarine approaches; when it draws close to ship, one of the ship's cabins falls apart, revealing a huge gun that sinks the U-boat. Artificial melodrama with acting almost as mechanical as the plot; George O'Brien as Commander Kinsgley strolls about exhibiting his muscles, while his crew looks about 15 years old and acts 12. Henry Victor is good as U-boat commander Von Steuben, also Marion Lessing as Von Steuben's sister, a German spy who Kingsley falls in love with.


"'My friend,' began the man with the bag full of religious tracts, persuasively, 'have you ever reflected on the shortness of life and the fact that death is inevitable?' 'Have I?' replied the businessman. 'Well, I should say so. I am an insurance agent.'"

A radical wrote to John D. Rockefeller, Sr. asking him to divide his huge fortune among the people. Mr. Rockefeller replied "Your suggestion is interesting, but hardly practical. However, to ease your mind on the subject, I am enclosing a check for $2.77, which would be your allotment if I acted on your proposition."

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