March 27, 2010

Friday, March 27, 1931: Dow 181.70 -2.50 (1.4%)

Assorted historical stuff:

Editorial: Gov. Roosevelt makes a good case for immediate action to protect thrift accounts in commercial banks. To review, commercial banks were allowed to enter the savings account field, but for consumer protection were strictly forbidden to use the word "savings"; they substituted "thrift" but effectively offered savings accounts. Recent commercial bank failures have shown "glaring defects" of the system, sticking savings depositors with unsalable assets. NY Legislature has shown a tendency to favor commercial banks, recently blocking similar protective proposals and also maintaining heavier taxes on savings banks. "If the savings banks have no longer a useful place in the community perhaps the Legislature can find a more direct method to destroy them."

NJ Traffic Commission reports US deaths from motor vehicle accidents in past 18 months were 50,900, compared to war casualty list in 18 months US was engaged in World War of 50,150.

World wheat conference has assembled in Rome to study methods for meeting the world wheat crisis; 46 countries in attendance; US represented by an observer. Conference is preparatory to a second conference, date of which will be fixed during the current conference.

Cabinet level employment stabilization board is being organized as specified in Wagner unemployment bill; consisting of Secs. of Treasury, Agriculture, and Labor, will report to Pres. upon approach of business depression, ask Congress for additional appropriations to increase public works.

Washington report: Govt. will take all available steps to avoid raising tax next year. Farm Board's decision to end stabilization should offer a large saving; another big item could be closing postal deficit, which would require Congress to raise rates; a number of small savings could also be made. However, the future deficit picture will depend on extent of economic recovery. If deficit at end of year substantially exceeds $410M sinking fund payments, a temporary tax hike is likely.

J. Aird, Canadian Bank of Commerce pres., says world has enough gold overall but suffers from maldistribution due to “rampant nationalism” and unwillingness to loan abroad; suggests pooling of world gold supply, changes in monetary policy by US and France, and aid for exploration and prospecting.

German ambassador assures Sec. of State Stimson proposed Austro-German union is purely economic, not political.

Editorial: Demand for some modification of antitrust laws is increasing. One proposal supported by both the Nat'l Assoc. of Mfrs. and the Amer. Bar. Assoc. would allow submission of proposed industry measures to the FTC; approval would still leave measures open to legal challenge but would exempt participants from severe penal provisions. This would be worthwhile, but in the meantime, business must get along for a least a year with law as is; recent Supreme Court decisions have made law less restrictive than commonly supposed, giving opportunity for business "to obtain a higher degree of rationalization" that shouldn't be neglected.

Editorial by T. Woodlock noting British govts. somewhat different attitude toward rail competition; Royal Transport Commission advised rails to stay out of highway transport, pool traffic between competitive points, and confine efforts to developing their own territory; “It is easy to imagine what would happen if the ICC ... were to make a similar recommendation.”

Illinois legislature passes bill to repeal state Prohibition enforcement and search and seizure acts.

IT&T demonstrates revolutionary new facsimile transmitting machine able to send 120 printed pages per hour.

Richest man in Spain is “plunger” Juan March; a few years ago, when Spanish dictator de Rivera gave March a tobacco monopoly, he frankly mentioned that the award had been criticized because of March's past smuggling endeavors, but said March had gone through a process of purification through his sacrifices for Spain.

Artists have felt the depression sorely; demand for pictures and portraits is down. Many have had to turn to commercial art, though even that is being reduced by use of photographs. One bright spot is trend for fashionable apartments to have pictures or outdoor designs painted on walls; this work pays up to $100/day.

Recently the German Society for Protection of Children was startled to learn of numerous children being offered for sale at $750 to $1,000. Officers of the Society found cause was a rumor that a film company wanted child actors; they had great difficulty convincing the "speculators in childhood" that this traffic in humans was illegal and that in any case no film company would pay more than a nominal salary for even the most exceptional child actor.

Market commentary:

Market wrap: Stocks advanced early but ran into resistance; weakness developed in coppers following Anaconda dividend cut; reaction widened, as leading industrials were attacked by bears and declines spread across the list. Support developed in the last hour, slowing the decline; tone was steady at the close. Bond trading listless, prices heavy; US govts. slightly lower; foreign govts. unsettled by sharp break in Australian issues, S. American also very weak; corp. generally lower, utility issues steady. Commodities mixed; grains fluctuated with wheat ending mostly higher and corn lower; cotton slightly lower. Copper remained at 10 cents, foreign buying active but domestic quiet.

Conservative observers lost what little cheer they had due to inability of market to sustain rally; most advise sidelines until market indicates definite movement.

Several other factors unsettled the market, including: rise in call money; pressure on oil shares due to production increase and East Texas situation; alcohol price cut from 35 cents/gallon to 24 cents; reported price cutting in packaged foods; and US Industrial Alcohol weakness due to dividend nervousness.

Market observers note leadership has been confined to trading favorites, while usual leader US Steel hasn't been doing much; a rally by US Steel would probably have a strong influence on public buying. Brokers report short interest has declined due to covering in recent sessions, particularly in trading favorites subject to pool operations. A new bull pool is reportedly active in Vanadium, involving some who were formerly bears on the stock about 30 points lower.

Broad Street Gossip: Some prominent NYSE brokers are now taking a more bullish position on oil shares, though news from that industry is anything but encouraging. However, this doesn't mean they're wrong: “conditions could hardly be any worse than they are, so the turning point may be close at hand.” Two views on dividends: “Payment of regular dividends by a big, well managed company in the face of deficits is almost sure proof that the management is not afraid of the future.” On the other hand, “Relative to dividends, it is not so much a question of what certain corporations can pay now, but what they can pay a year from now.” The Old Timer notes the market's “digestive organs” are much stronger then last year as seen in response to bad news; a head of one brokerage notes “liquidation is over”; stocks go down in response to bear pressure, but as liquidation fails to appear, they go back up.

Frazier, Jelke point out that stocks making new yearly highs continues to outnumber new lows; "so long as the averages remain in a meaningless trading area, we are inclined to pay more attention to the number of new highs and new lows ..."

Calvin Bullock comments on managed investment trusts [similar to mutual funds]: British trusts have been miuch better managed than US; best yardstick for measuring trusts is comparison of liquidation value with market averages over a long time; managed trusts, while out of favor now, will eventually recover.

Transamerica [investment trust co.] announces J. Bacigalupi succeeds A. Giannini as pres.; Mr. Giannini says he has wanted to retire for some time, but “in the interest of the corporation I have remained as president through the most acute period of the business depression, from which I feel we are now clearly emerging.”

P. Litchfield, Goodyear pres., says regrets unable to report noteworthy improvement in tire industry. Company seen unlikely to earn dividend in first quarter.

Future foreign financing seen likely to be by direct investment through “large American interests,” due to current difficulty of selling foreign bonds to US investors.

W. Gifford, AT&T pres., defends past overly optimistic govt. bulletins on business, says they prevented panic: “If there were not more optimism in the bulletins than the facts warranted, it would, I think, be the first time that a compilation from business sources for publication was free from this bias.” Average American believes business conditions are partly psychological and so shades statements optimistically; “moreover, he knows that to make a gloomy prophecy in public will earn for him the dislike of the business world.”

Economic news and individual company reports:

Anaconda cuts annual dividend rate to $1.50 from $2.50. NCR omits dividend on class A stock.

First 39 rails reported Feb. net operating income down 46% from 1930.

Fed. Reserve reports money in circulation Mar. 25 down $15M to $4.547B, total Reserve Bank credit outstanding down $49M to $858M. Member banks in NY City report brokers' loans down $5M to $1.908B; loans on securities to non-brokers down $16M to $1.830B.

Call money rate increased to 2%, though bankers indicated this was due to temporary factors and should ease in a few days.

Dow average of 8 iron and steel products declined to $44.23/ton vs. $44.50 prev. week due to decline in sheet steel; new low for 1931; 1930 range was $44.29 - $49.88.

Wall Street was encouraged by news from Manchester, NH that a big textile firm had to advertise for workers for the first time in several years; textile mills and a number of the largest shoe plants there were operating at full capacity.

Texas Railroad Commission meeting on oil proration; expected to limit new East Texas area to 50,000-70,000 barrels/day; former Gov. Moody says curtailment would be accepted in the area in return for restrictions on imports.

500 striking workers and sympathizers riot at Sidney Blumenthal textile plant in Shelton, Conn.; crowd subdued with tear gas and clubs after attacking five guards brought in to protect outside workers.

Total value of US mineral products in 1930 was about $4.8B, down 18% from 1929; metallic products $985M, down 33%. Both price and volume declined for almost all products.

Chile per capita exports in 1929 were $63 vs. $42.70 for the US; imports were $44 vs. $35.90. Chile seen likely to raise tariffs by large percentages, including 20%-250% on cars, 250% on tires, 100%-500% on machinery, 70% on sugar, etc.

Foreign currencies reversed yesterday's decline; sterling continued gain vs. franc; silver-based currencies stronger.

Australian state of New South Wales reportedly plans to maintain bond interest payments in US but default them in London until Britain renegotiates debt; all Australian bonds down sharply.

Bank of England was able to replenish gold in the open market in past 2 weeks, increasing holdings 2.789M sterling to 144.5M. However, reserves are still below the desired “Cunliffe minimum” of 150M, and the Bank still is withdrawing credit to maintain higher bill rates in London. British Building Trade Council decides to continue current work agreement for a semester, in victory for workers. British rail workers accept arbitration committee decision.

French steel production in Feb. was 693,000 tons vs. 746,000 in Jan. and 772,000 in Feb. 1929.

Tourist spending in Canada was $280M in 1930, down $28M from 1929.

G. Swope, GE pres., denies reports company plans to go on 5-day workweek and reduce wages and salaries 10%. While GE 1930 sales were only down 10% from the 1929 record high, backlog entering 1931 was only $56.1M, and new bookings in Q4 1930 only $74.2M; both of these were the lowest in over 5 years.

Amer. Tobacco reported record 1930 earnings of $8.56/share vs. $5.76, and have predicted another record for first-half 1931 earnings; stock hasn't done much in response, currently about 116 vs. 1931 range of 104 - 120 1/2. Amer. Ice stock about 30, annual dividend $3, net in 1930 $3.93/share vs. $4.22 in 1929.

Compania Swift Internacional (S. American beef exports to Europe) reported record earnings for 1930; earnings stabilized after a trade agreement was put into effect in 1927 dividing the market betweek packers.

Companies reporting decent earnings: Bangor & Aroostook RR (against industry trend), Metropolitan Paving Brick, Bohn Aluminum.


Dance, Fools, Dance - Thrilling melodramatic vehicle for Joan Crawford, playing girl who becomes newspaper reporter after her family loses its wealth in the market crash. Loosely based on murder of Jake Lingle, Chicago reporter, by gangsters; builds to breath-taking climax. Other outstanding performance in the picture is "work of Clark Gable, a relatively new personality on the screen," playing Jake Luva, gang chief who orders reporter's murder to suppress story of the massacre of six rival gangsters.


'How was the prohibition lecture?' 'Great, except the lecturer tried to blow the foam off his glass of water.'

Employer - Yesterday you took the afternoon off, on the plea that you were ill. Yet, I saw you at the races and you didn't look at all ill to me. Worker - Ah, you should have seen me after the fourth race.

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