February 17, 2010

Tuesday, February 17, 1931: Dow 182.88 +2.47 (1.4%)

Assorted historical stuff:

Washington report: Current Congressional session likely to be most expensive ever in peacetime, even not including veterans' bonus; with the bonus, spending authorized is likely to top previous record by $750M-$1B. Combined with declining revenues and deficit for current fiscal year, a large tax increase is indicated; "Congress would like to leave the impression that a tax raise will be confined to the upper brackets. There is no assurance of this." How Treasury will handle financing for bonus is uncertain; Treasury has said outstanding short-term debt of $2.8B is already too large. Both Pres. Hoover and Sen. Dem. leader Robinson attacked by party members for drought relief compromise. Rep. Hull (D, Tenn.) hits high tariff walls as greatest cause of depression.

Rep. LaGuardia (R, NY) responds to challenge by Martin Insull to attack utilities outside Congress by renouncing Congressional immunity and repeating charges outside on public street.

R. Stephenson, Amer. Bankers' Assoc. pres., appears before Glass committee; opposed to unified banking under Federal control, attributes many bank failures to failure of communities the banks served. M. Traylor calls proposal for unified banking most dangerous in his lifetime.

British economic experts draw up 5-year plan to enable British industry to keep pace with US and Russia; based on consolidation into large units with worker and consumer representation, elimination of competition.

Editorial: The US should participate in the League of Nations armament conference called for Feb. 1932, sincerely if only unofficially; the "familiar argument of American isolationists" that the US should detach itself from world politics won't play well abroad. In particular, there's no good reason why a US citizen shouldn't act as chairman if participating nations so desire.

Editorial: US trade with S. America declined 30% in 1929; this is a matter of concern, considering loans and billions of direct investment the US has there. The trade decline coincided with drastic declines in S. American export commodities. It's reassuring that commodity prices seem to have turned up in Feb., though one month doesn't make a trend. A US recovery, causing increased demand and prices for commodities, would likely lead to a trade recovery with S. America.

Editorial by T.Woodlock: US rail system contains a great deal of deadwood that should be abandoned; 30% of rail mileage does only 2% of business.

Drought-breaking rains fall over much of the Southwest; Weather Bureau says drought should be relieved in most states South of Iowa.

State Dept. says 1931 immigration to US to be reduced to 18,000 from previous avg. of 153,000; restriction to continue until unemployment situation remedied.

Pittsburgh Plan” for unemployed advocated by Penn. Gov. Pinchot is surveying unemployed and attempting to raise $1M from employers.

A record 511 people reported income over $1M in 1928; 26 reported income over $5M, with 11 of those in NY State.

NYU School of Law forms Amer. Academy of Air Law to develop aviation law along rational lines.

One far-sighted air transport co. is looking ahead to a time when the air is filled with planes. Although there has never been a case of two commercial planes colliding at night, Transcontinental & Western Air is eliminating any possibility of this by installing a red spotlight on the wings of all its planes.

Detroit News buys a Pitcairn autogiro [predecessor of helicopter] for newsgathering, aerial photography, and emergency distribution of papers.

T. Baker, Carnegie Inst. pres., says development of liquid coal for fuel in case of exhaustion of oil supply is only way to improve conditions in coal industry.

P. Wagoner, Underwood pres., says two of every five typewriters sold is now a portable, believes portables will overtake standard models in not distant future.

Saskatchewan, Western Canada is being plagued by an increase in cattle thefts by rustlers using trucks to transport cattle or carcasses.

Alaska is being overrun by reindeer herds now numbering over 1M animals, and growing at a rate of over 200,000 fawns/year.

Market commentary:

Market wrap: Stocks easily absorbed a moderate amount of sell orders accumulated over the weekend, then advanced broadly; cos. supplying the auto industry rallied; strength spread to rails and utilities while oils, banks and trusts lagged; buying demand continued impressively through session. Bond trading quiet; US govts. down slightly; foreign steady to firm; corp. high grade steady, speculative strong. Commodities weak; grains down substantially; cotton little changed. Silver declined 5/8 cent to new record low of 25 3/4 cents.

Conservative observers advise against either following stocks up or going short; most advise buying leading issues gradually on declines; a growing number anticipate a technical reaction.

Business improvement hasn't been outstanding, but has been slow and steady in some important lines, including steel and automotive; other industries at least show signs of flattening rate of decline. Many industrialists see this year as one with a gradual but sustainable uptrend, as opposed to 1930, which started with a spurt but ran into severe recession later. Earnings of many industrials are expected to be poor this quarter and the next.

Encouraging news included stepped up production at Oldsmobile and Oakland-Pontiac divisions of GM, better public response to Chrysler and Hudson models, and impending adjournment of Congress.

Broad Street Gossip: NY State savings banks reported record-breaking gains in deposits of $74.8M in Dec. and $95.6M in Jan., ending Jan. with a new record of 5.344M accounts. In addition, $650M of new securities were sold in Jan. "If all that can be accomplished in a year of depression, what will the result be when industry again reaches normal?" A well-known economist notes companies with the best earnings performances last year were those that spent liberally on advertising. Some of the "large interests" have been buying, but some are waiting to see if business has definitely turned up. "The big interests always are the real factors in starting a major upward swing," though they don't always act together.

One trader has run into trouble so often trying to "catch the last eighth" that he has standing instructions at his broker to deduct an eighth from the price on all sell orders, and add an eighth to the price on all buys.

H. Bowker, Amer. Agric. Chemical pres., says potential US sales of fertilizer huge; over half of farms use none; if US farmers used as much per acre as German, annual consumption would be 63.5M tons instead of current 8M.

F. Brownell, Amer. Smelting & Refining chair., sees key to silver trend in future sales by India.

E. Reeser, Barnsdall Corp. pres., questions if domestic oil curtailment can succeed without also curtailing imports; notes country has potential production of 10M barrels/day but has by agreement reduced actual production from 3M to 2M; most wells now unprofitable; believes curtailment must be permanent since demand for crude oil has about reached its limit.

C. Bockus, Nat'l Coal Assoc. pres., says millions of tons of coal sold below labor cost to produce it; prices back to pre-war levels, “and I am not sure it makes any difference which war ...”

W. Cambpell, Ford Canada pres., says business has passed bottom of depression, believes Canada resuming expansion.

Harvard Economic Society says depression apparently at or near bottom, indicators that most reliably signalled past recoveries are favorable or have levelled off.

Economic news and individual company reports:

M. Steuer Bank of US investigation hears testimony of J. Cowen, director and uncle of B. Marcus, bank pres. Mr. Cowen fails to remember discussion of loans to affiliates, gives impression board approved transactions without looking at details. Mr. Cowen owed the bank $500,000 when it closed. Mr. Steuer also implied the bank's real estate equities were practically worthless, making reorganization improbable.

Dominick & Dominick note total value of new securities marketed in the US in 1930 was $7.7B, down 34% from 1929, "This decline clearly demonstrated that in a period of depression and lack of confidence, the existence of cheap money and ample banking credit do not stimulate new financing." Proportion of securities in the form of bonds and notes were 71% of the total, vs. 31% in 1929; largest borrowers were public utilities.

Commerce Dept. reports US customers buying at least $5B of goods on installment plans, while bad debts average only 1.2%. A. Morris, Industrial Fin. Corp. pres., views this record as “triumph of character for the American consumer who, 20 years ago, was regarded as untrustworthy for more than 30 days and seldom that long unless he was quite a person in the community”; reports young women better credit risks than young men, young single men better than married.

ICC lowers rail transport rates on petroleum and its products.

Germany receives foreign loan of 300M marks with participation of major world financial markets; French participation in particular is seen as highly significant, and evidence “Germany's moderate policy in international relations is bearing fruit”; this was first time since the war the French market undertook a loan for use of the German govt., aside from reparations-related loans.

Frauds totalling $400,000 discovered at Banco Nacional Ultramarino, second-largest bank in Portugal, recently taken over by govt.

French Budget Min. says deficit for current year will be over $80M, new budget faces similar difficulty unless spending is limited. French carloadings averaged 58,700 in Dec. vs. 60,500 in Nov. and 65,100 average for 1929.

Oil production in Alberta, Can. in 1930 was 1.434M barrels vs. 999,152 in 1929.

Anti-chain store tax measures are pending in 33 states, and subject of legal challenge in Kentucky.

NYSE seat sold for $295,000, up $20,000 from previous sale.

Phillips Petroleum likely to omit next quarterly dividend.

Companies reporting decent earnings: American Can, Continental Can, American Home Products, Swift Internacional, Pacific Western Oil, Calgary Power, Baldwin Rubber.

Movies:

Dracula - Although produced with "eerie atmospheric backgrounds," conveys little of the terror which made Bram Stoker's novel such exciting reading. Dialogue and action are too slow to be effective. Bela Lugosi repeats role of "human vampire" that he portrayed on stage, and Edward Van Sloan is Dr. Van Helsing; "both play their parts in a conventional stage manner which is not well suited to motion pictures."

By Rocket to the Moon - directed by Fritz Lang. Suffers by comparison with the "more tinseled" Hollywood production Just Imagine. The director, who consulted with German authorities on aeronautics and rocket flight for authenticity, came up with "a moon too drab to be entertaining"; a love triangle plot seems out of place.

Jokes:

'Well,' said the suitor, returning from seeing her father, 'he asked me how I was fixed, and I told him I had $3,000 in the bank.' 'And what did he say to that?' 'He borrowed it.'

"' I called on Mabel last night, and I wasn't any more than inside the door before her mother asked me my intentions.' 'That must have been embarrassing.' 'Yes, but that's not the worst of it. Mabel called from upstairs and said 'That isn't the one, mother.'"

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