Wednesday, February 25, 1931: Dow 194.36 +3.04 (1.6%)

Assorted historical stuff:

Editorial: NY Gov. Roosevelt is a nationally prominent Democrat; with 1932 on the way, his record will be of interest around the country next year. The NY State legislature is now considering an investigation into govt. corruption in NY City; a slim Republican majority is being blocked from starting the investigation by the Republican leader of Westchester County, which adjoins the city. To date, Gov. Roosevelt's response to this situation has been disappointing. "In such a matter a man like Gov. Roosevelt cannot becomingly take the typical position of a professional politician, to whom it is a trifling matter to affront the conscience of good citizens. ... Can a man of presidential stature be content to make so feeble a response to events of such serious import?"

Sen. Borah (R, Idaho) and Robinson (D, Ark.) urge immediate investigation of charges published by NY newspaper that unnamed Senator accepted bribe over $100,000 to promote a high sugar duty.

Supreme Court upholds 18th Amendment (Prohibition), reversing decision of Judge Clark in NJ District Court that it was adopted unconstitutionally.

Washington report: Pres. Hoover's action on veterans' bonus and Muscle Shoals awaited; two vetos are expected. Regardless of whether they are sustained or overridden, they will have a strong effect on the future course of these issues, and on Pres. Hoover's political future. "The reputation of more than one President has been made by veto messages." Pres. Hoover has produced none of significance yet; these may be a good opportunity, "particularly if there is any basis for the current judgment that the downward curve of presidential popularity has reached its bottom." House and Senate pass second Wagner unemployment bill providing for system of Federal and State employment agencies despite Administration opposition.

Nat'l. Bank of Greece Gov. Diomedes going to London to discuss second portion of public works loan.

French Fin. Min. Flandin reports good progress at conference of British and French treasury experts; agreements understood to have been reached on bolstering European credit and on central bank cooperation to prevent gold drain from London. Bank of France reportedly may cut rate below current record low 2%.

Rebels in Southern Peru appeased after personal manifesto from Lieut.-Col. Sanchez Cerro reversing program of the military junta and promising Constitutional rule. Announcement follows reports that military forces in South were prepared for action against regime unless drastic changes were made.

Canadian immigration authorities are retaliating for US barring of Canadian workers in border communities by restricting entry of field workers from the US South to work "the great new tobacco field of Norfolk County, Ontario."

Editorial by T. Woodlock: Problems of the anthracite (hard coal) industry are due largely to intransigence of union in restricting production per worker; reasonable compromise on this issue would benefit both operators and miners by lowering product prices and increasing market. However, while recent years don't compare with “Molly Maguires” era of the 1870's, “iron rule” of the unions makes such a sensible plan unlikely.

British complete tests of new "fighting plane" carrying six machine guns and four 20-pound bombs; craft has ceiling of 26,000 feet and speed of 194 mph.

NY, Phila. & Washington Airways sets record for one day's air traffic, carrying 355 passengers between Newark and Washington Feb. 21 using 16 extra planes.

Scripps-Howard organization seeks to buy World and Evening World newspapers from estate of Joseph Pulitzer and consolidate them with New York Telegram.

Argentine voters are fond of casting "voto fundado," in which they explain the reasons for their vote, even though this disqualifies the vote from being counted. The reasons given are often humorous; for example, one voter wrote that his candidate seemed a shade less fatheaded than his opponents, and, though a grafter, was at least not a grafter and a hypocrite like the others.

"The famous storks of Strassbourg are disappearing. ... Hundreds of storks nests' bristle in the lofty towers of the Strassbourg cathedral" and other commanding spots around the city. The Ornithological Society of France has discovered that their birth rate is declining so quickly they will soon be extinct.

Market commentary:

Market wrap: Stocks opened very strongly on a huge accumulation of buy orders over the holiday; stock ticker ran substantially behind for first time since new high-speed system was installed; vigorous advances continued across the list for first four hours, with new yearly highs in leading industrials and utilities, and sharp advances in trading favorites. Profit-taking developed in the afternoon, becoming heavy in the last hour; however, trading slackened on the setbacks and downturns were limited to moderate proportions. Bond trading active; US govts. quiet, off slightly; foreign strong; corp. irregular but mostly higher. Commodities mixed; grains generally lower; cotton up very sharply.

Market observers more cheerful; recommend picking up standard stocks on reactions, but advise protecting positions with stop-loss orders, and raising the stop-loss limits as further advances take place.

Dow theory adherents were impressed by Saturday's advance in the Dow rail average to a new yearly high, "confirming" advance in the industrials; while technical reactions may occur from time to time, "line of least resistance appears likely to be on the upside for an indefinite period"; an advance to around 200 on the Dow is anticipated before any serious resistance is encountered.

Some bears rumored to be switching to the long side, but a stubborn short interest is being maintained by skeptics who believe the rally has outpaced business improvement; some traders have also been trying to catch the market top with new short positions. Bull pools also continuing their activities. Bank stocks' recent improvement considered significant; they had been severely deflated, with leading NY City bank stocks declining about 72% from fall 1929 peak to the Dec. low. Insurance stocks, on the other hand, didn't participate much in the past week's rally.

Money market expected to firm due to month-end influences and upcoming Treasury and NY City financing. Foreign currencies stronger; British bill rates continue higher to counter advances in NY, now at about 2 5/8% vs. 1 5/8% in NY.

Broad Street Gossip: An Old-Timer believes the market rally “will do more to restore prosperity than anything else.” Total security values have increased over $20B since start of year; barring another dive in the market, this assures a recovery since the 10M-15M US owners of stock feel richer. Bulls say the ease with which considerable profit-taking has been absorbed recently is “the surest indication of a strong healthy market.” Market has rallied very substantially; “if it runs true to form, it will have one of those 'healthy reactions' that will, according to the bulls, strengthen its 'technical position.'” “The buying power of the people and the corporations still is large ... In other words, the country never was in a better position to stage a comeback after a depression ...”

Rather convoluted analysis indicates a likely recovery in rail freight in 1931-32 based on patterns of previous depressions since 1900.

L. Domeratzky of the Commerce Dept. notes general failure of international cartels to stop downward price movements in many commodities.

London stock market has been better this week following more a optimistic speech by Chancellor Snowden on Saturday. German bond outlook believed better; Communist disturbances of last fall have run out of steam, while Chancellor Breuning appears to have better control of the Reichstag and revolutionary factions have been less prominent. While few would predict when the economy will turn definitely upward, the worst is thought past.

Guaranty Trust of NY monthly review says Jan. business upturn appears to have been almost entirely seasonal, with activity in Feb. mixed; most that can be said is that decline in business activity has stopped, but no clear trend is now visible; anticipates a few flat months, followed by gradual uptrend.

Editorial: Retail price cuts have lagged behind wholesale prices declines longer than usual in depression periods. "There can be little question that excessive first prices, together with a mistaken emphasis upon original cost instead of replacement cost as the basis of pricing, have had something to do with retarding business recovery." By many indications, merchants now are adjusting prices to lower levels; smaller profit margins should be compensated for by higher turnover.

H. Williams of NY Title & Mortgage Co. tells Glass committee conditions in guaranteed real estate mortgages far more encouraging than a year ago; many loans have survived two or three renewals, indicating people are protecting real estate holdings; hits real estate bonds as more complex, with less margin of safety.

L. Miller, Willys-Overland pres., sees US auto upturn continuing; Feb. sales were up 40% over Jan., March expected to be up 40% over Feb.; expects total sales for 1931 at least 10% over 1930, or about 3.8M cars and trucks.

C. Schwab says barometer of general US business conditions improving; steel earnings improved in Jan. over Dec., and improved further in Feb.

Economic news and individual company reports:

Bank of US officers file to dismiss indictments on grounds two members of the grand jury held accounts in Bank of US. At bankruptcy hearings, testimony that on July 16, 1929 loans to directors totalling $9.974M were approved by the directors; loans were granted without collateral, and below call money rates at the time.

Rail freight loadings for week ended Feb. 14 were 720,689 cars, up 1,636 from prev. week but down 19.3% from 1930 week, and down 24.7% from 1929.

NY Cotton Exchange reports strong sales of cotton cloth in the past two weeks; cotton mills are now "in the favorable position of holding larger orders and smaller stocks than at any time since early 1927." Foreign sales also reportedly improving.

Crude oil production in week ended Feb. 21 was 2.165M barrels/day, up 37,550 from prev. week but down 556,800 from a year ago. “Forests of derricks” are springing up in the new East Texas oil area.

Governments of countries producing 88% of world's tin agree to enforce two-year curtailment of production.

One of the biggest bond syndicates ever organized, including over 50 houses, will be a bidder at the huge $100M NY City bond sale next week.

US rail freight traffic in 1930 totalled 422.1B net ton miles, down 14.3% from 1929 and 11.5% from 1928; Dec. traffic was 29.0B, down 19.5%.

Natural gas cos. reported 1930 sales down 1.4% from 1929; decline was much smaller than for coal or petroleum.

Travelers' checks used in 1930 estimated at $400M-$500M.

American Machinist reports machine tool outlook brighter in Feb., though sales have held at Jan. level.

Number of workers insured against employment has increased to about 48M from less than 5M in 1919 (year of Int'l Labor Conf. in Washington); countries with most insured are Germany 16.7M (3.5M now unemployed), Britain 12.1M (2.5M now unemployed), and Russia 10M; insurance is mandatory in these countries. Russian payments have been suspended since Oct. due to high unemployment.

Canadian report: Customs collections in 1930 were $161.4M, down $45.6M. Exports of cars and parts in 1930 were $20.4M, down 57% from 1929, 43% from 1928, and 36% from 1927. Production of cars in 1930 was 154,152, down 41% from 1929. Building permits in 61 cities in Jan. were $7.5M, down seasonally from $15.4M in Dec., but higher than $7.2M in Jan. 1930. Sun Life pres. T. Macaulay statements at annual meeting: company now willing to take profits on stock holdings in some situations; will increase holdings of preferred stocks and bonds; anticipates maintaining high level of distributions to policyholders.

Canadian govt. sets prohibitive tariff on imports of US carrots.

Treasury Dept. finds no justification for issuing finding of Soviet manganese dumping in US.

Automatic Voting Machine Corp. expected to benefit from growing adoption of their voting machine by state and local governments. Caterpillar Tractor and Allis Chalmers are reportedly experiencing record first-quarter business. McKeesport Tin Plate is operating at 100% capacity.

Companies reporting decent earnings: Standard Gas & Electric, Illinois Northern Utilities, A.O. Smith (piping, special steel shapes, etc.), Bourjois (cosmetics), Hale Bros. Stores, Novadel-Agene (products for bleaching wheat and flour), Telautograph (machines transmitting diagrams by wire).

At the galleries:

Museum of French Art presents a strong exhibit of paintings by Picasso, Braque, and Leger. Third International Antiques Exposition will be held at the Grand Central Palace. Among the rarities on display will be the Treaty Room where representatives of Charles I and Oliver Cromwell met in 1645, and two needlework rugs made by Marie Antoinette and her companion, Madame Elizabeth, during the last years of their imprisonment.

Joke:

"First Chorine - Did you tell anybody of your secret marriage? Second Ditto - No, I'm waiting for my husband to sober up - I want him to be the first to know."

A Chicago actress entered a lawyer's office and asked what the fee would be for a divorce. "Five hundred dollars" was the reply. "Nothing doing," retorted the lady. "I can have him shot for ten."

"'How d'yer like yer new boss, Mame?' asked one stenographer of another on the elevated. 'Oh, he ain't so bad, only he's kind of bigoted.' 'What yer mean, bigoted?' 'He seems ter think that words can only be spelled in his way.'"