Monday, March 2, 1931: Dow 189.66 -0.68 (0.4%)

Assorted historical stuff:

Officers of bankrupt National Diversified Corp. indicted for defrauding 400 Catholic priests and 6,000 laymen of $2M in two years in fraudulent sale of stock for ostensible purpose of financing "clean" motion pictures.

Agriculture Sec. Hyde charged by Sen. Caraway with “deliberately holding up” $20M drought relief funds. Sec. Hyde announces rather complex arrangement for using $10M of the funds; farmers would be required to use loans to subscribe to stock in farmers' credit cooperatives.

Washington report: Congessional session was characterized by “almost total lack of achievement of a constructive character.” Heavy spending was probably inevitable due to emergency measures, as was some amount of playing politics. However, veterans' bonus was harmful, and prolonged extra session agitation may have hurt business. Pres. Hoover seen gaining popularity from public reaction against Congressional efforts to embarass him. If at the end of the upcoming 9 month respite from Congress “the nation is nearer normal economically ... Mr. Hoover will be a more powerful political figure than at any time since 1928.” The only constructive measures originating in Congress this session were the Glass financial investigation and the Wagner unemployment bills.

Commerce Dept. predicts France will become international lender again due to large growth of reserves; now negotiating over $100M loans to Eastern Europe.

Farm Board plan to export 35M bushels of wheat causes consternation at European grain conference; delegates call it "American dumping." Editorial: Farm Board is correct in starting to dispose of its huge surplus, but mistaken in letting it become so unmanageably large to begin with; this was a pure gamble on being bailed out by some kind of crop catastrophe. Cleaning things up now will be enormously expensive. Farm Board reassures on cotton; says will not dispose of 1.3M bale surplus holdings unless price equal to that paid.

Canada bans imports of Russian coal, lumber, and furs due to "virtual slavery" used in production. H. Bancroft, Dow Jones pres. and Wall St. Journal publisher, agrees with prominent Canadian businessmen on stand against relations with Russia; emphasizes Russia has stated it's waging economic war on Western civilization and will move on to regular war when ready. On the other hand, former Canadian MP H. Mackie returned from a visit to Russia and reported coal miners there were among the best paid in the world.

Editorial by T. Woodlock analyzing mysterious methods ICC uses to value railroads for recapture of "excess" profits. Main bone of contention seems to be that ICC is taking the politically "liberal" position of using original (prewar) building costs, not [higher] current reproduction costs. However, with prices now sinking rapidly, "the time cannot be far distant when our 'liberal' friends will ... rush for the boats of 'reproduction cost.'"

NY World employees are attempting to organize to take over the old World plant and establish a new newspaper.

First London-Africa airmail line to be operated by Imperial Airways; flies to Cairo, then Southern shore of Lake Victoria; will eventually continue to Cape Town.

Some corporations now have among the finest first-aid hospitals in the country on their premises, and a considerable number have complete small hospitals, including doctors and nurses in attendance, operating rooms, and "the most up to date medical and surgical appliances."

Some uses for salt as publicized by International Salt: ant repellent, treatment for dandruff and tired feet, antidote for silver nitrate.

Gillette announces improved safety razors designed to prevent use of blades other than Gillette.

Trico Products may equip 1,000 taxicabs "with a mechanical device which will flash before the eyes of passengers a continuous program of illuminated advertising."

Market commentary:

Market wrap: Stocks continued down in the weekend session; however, good support came into leading shares after the first hour and attempts to force further declines made no headway; some rallying took place off the day's lows. Bond trading active, prices irregular; US govts. quiet, mostly firm; foreign active, some new yearly highs; corp. high grade mostly steady, speculative irregular. Commodities mixed; grains generally lower; cotton up moderately. Copper price advanced 1/4 cent to 10 1/2 cents.

Week in review: Stocks advanced Tuesday to a 1930 high of 194.36 on the Dow, on volume of 5.3M shares, heaviest since June; prices then settled into a trading range. Rally has recaptured half the ground lost from Sept. - Dec. 1930, so the "utmost significance" is seen in near-future price movements; continued strength after brief consolidation period would indicate a more-than-technical recovery. However, "at all events no important break seems in sight." Money market quiet, with no important rate changes. US govt. bonds declined early in the week but then rallied, while foreign and corp. were generally strong. Foreign currencies irregular; reports of possible Bank of France rate cut drew attention; silver relatively stable. Steel continued gradual and uneven improvement. Grain prices turned sharply down toward end of the week. Cotton rallied, then lost most of gains.

Conservative observers continue recommending the sidelines until "market has demonstrated that it is ready to stage another good advance."

Notable weak spots included public utilities, NY Central, and oils. Strong features included NY tractions [mass transit], Mead Johnson (baby food).

Leading fixed trusts [similar to ETF's] reported record sales in Jan.

Market has encountered resistance since hitting new 1931 highs Tuesday, natural in view of the sweeping rally up to then. Previous pauses in early Jan. and mid-Feb. were followed by renewed rallying; evidence this is a similar period of consolidation seen in pattern of declining volume on recessions, indicating line of least resistance remains upward. Current reaction seen as technical; "interests sponsoring the principal shares felt that market conditions would be improved by a period of adjustment in the general list."

Business news was mixed; bears pointed to decline in Youngstown steel production and poor NY Central earnings report for Jan., while bulls cited moderately encouraging weekly trade reviews and AFL report of higher employment in Feb.

Bears continue to argue market rally has run ahead of modest business improvement; some bulls counter that the Dec. plunge was in fact an overreaction not warranted by actual business conditions, possibly due to unloading of weakened speculative positions after Prince & Whitely failure in Oct.

Broad Street Gossip: While warnings are now plentiful that stocks have gotten too high, these warnings always come after a substantial rise in the market. In spite of the good recent rally, stocks are still below the lows reached in Nov. 1929, after the fall panic; at that time, most thought they were too low, and John D. Rockefeller publicly advertised the fact that he was buying. Judging from the low inventories at many corporations, demand for materials that go into finished products is bound to grow. The same can be said for the finished products themselves, judging by the bare shelves at many stores.

National City Bank monthly review cites high industry costs as impeding return to prosperity; while farm production costs have been cut drastically, many other industries haven't cut production or distribution costs proportionally, and cost of living remains well above prewar level.

Sir Percival Perry, Ford Motor Ltd. [Britain] chair., says co. has found costs of production lowered rather than increased by high wages.

Rudolph Guenther-Russell Law, Inc. reports on survey of security ownership in US; finds no indication of saturation, “and there will not be in the near future unless something extremely radical should occur which would destroy all faith in our government and industries.”

J. Barnes, Nat'l Business Survey Conf. chair., reports indications of business improvement from low point in Dec.

J. Klein, Asst. Commerce Sec., says in spite of trade decline due to depression, tariffs, etc. US is maintaining preeminent relative position among exporters.

W. Muller, NY Curb Exchange pres., says 1930 left lasting impression on financial world, refuting conclusively the “plateau of prosperity” theory that had overtaken the “business cycle” theory in 1928-29. Even in early 1930, stubborn belief persisted that the business cycle had been defeated, as “organized and determined” multi-billion effort was exerted by business to “dissipate by intervention the already existing forces of depression.” However, sees better conditions, or at least stabilization, in 1931, based on thorough liquidation in last half of 1930 and progress of the cycle.

Economic news and individual company reports:

Fed. Reserve reports Jan. department store sales in NY district down 7.6% from 1930; inventory at retail value down 10%.

Sharply falling total of “all other” (commercial) loans reported by Fed. Reserve member banks attributed to sales of bankers' acceptances (which are counted under that total) rather than to decline in business demand for credit.

J. Brown, former [failed] Bancokentucky pres., indicted on charges of embezzling over $2M in bank funds. Deputy Comptroller of Currency F. Awalt advocates campaign of education for bank directors; “obviously the law did not contemplate” that they should be figureheads attending meetings merely to get fees.

Increased March production scheduled by Chevrolet, Buick, Olds, and Oakland/Pontiac [GM divisions], and Hudson. Auto parts makers report increased business in Jan. and Feb.; index in Jan. was 84 vs. 69 in Dec., 72 in Nov., and 132 in Jan. 1930.

First 67 rails report Jan. operating income down 37.3% from 1930 and 53.5% from 1929; strenuous management efforts to cut expenses were unable to keep pace with sharp declines in gross revenues, down 16.7% from 1930 and 24.8% from 1929. Southwestern rails ask ICC for permission to lower rates on transporting cars to meet truck competition.

Youngstown district steel production to decline 2% to 48% this week. Chicago producers advance prices on some finished products.

Some encouraging signs in copper statistical situation, but only after drastic production cuts. World consumption increased from 130,000 tons/month in first half 1930 to 146,000 in 3 months ended Jan. Production has fallen below consumption after curtailment agreement, though refined copper inventories remain high.

Fisher's wholesale commodity index unchanged at 75.8, after declining for 11 weeks in a row from 80.7 in Dec. 5 week.

Corn on farms Mar. 1 about 646.4M bushels, down 415M from 8-year average and lowest since 1901.

After losing battle for oil import restriction, Congressmen from oil producing states may ask Tariff Commission to recommend tariff on imported oil. Sinclair Oil petitions Oklahoma Corporation Commission for increase in allowed production at Okla. City fields of 50,000 barrels/day. Standard Oil of Calif. cuts gasoline prices by 2 cents/gallon for the second time in a week.

NYSE trading in Feb. was 64.2M shares, down 4.5M from 1930.

Average interest rate paid by all US mutual savings banks Jan. 1 was 4.59% vs. 4.56% prev. year; rate paid on $9.465B to 12.226M depositors.

A number of recently issued annual reports show companies have been buying back their own stock in the open market.

India increases duty on imports of silver; seen as “further perplexing factor in a situation already complicated.”

All diamond mines around Johannesburg, excluding De Beers, to cut back drastically due to unprofitable operations.

NY Central Jan. operating earnings $1.9M vs. $5.6M in 1930.

International Harvester to ease credit terms to farmers on tractors and machinery; competitors likely to follow suit. Conservative brokers warn against farm machinery makers.

Companies reporting decent earnings: Niagara Hudson Power, NY Telephone, Penick & Ford (corn products), Beech-Nut Packing, Waldorf System (restaurants).

Theatre:

Paging Danger - If not the worst play on Broadway in years, at least the worst one involving a Russian princess.

A Woman Denied - "A febrile play built around a tawdry story of an Italian painter in the clutches of a wicked Parisian model ... The air is stuffy with cries of 'that woman!' and 'you gutter rat!' ... story comes to a welcome end as Barbara is murdered by a simple peasant boy whose motives for this deed are not entirely clear to a puzzled audience."

Jokes:

Lady - I left my money at home, but you will have to trust me, for I am one of the director's wives. Conductor - Lady, I couldn't trust you if you was the director's only wife.

"Father - You like my daughter? Suitor - Like her? I would spring off the top of the cathedral for her, die for her, slave to please her, go through fire to save her pain - Father - ... I can't consent to the marriage - I am a pretty good liar, and one in the family is enough."