Monday, March 9, 1931: Dow 183.85 +4.12 (2.3%)

Assorted historical stuff:

Washington report: Die-hard legislators seem to be having difficulty saying goodbye after Congress adjourned Wednesday; some have recognized a sudden deficit of Washington news and "have remained in the Capital ready to furnish statements to all comers," while others have filled their time extending their remarks in the Congressional Record; in particular, "Senator Heflin, of Alabama, occupies more than two pages with messages sent to him telling them what a valuable public servant he has been." Supreme Court to decide major case on constitutionality of anti-chainstore laws. As of Jan. 1, 10 states had enacted such laws and 21 more were considering them; much litigation concerning the laws is ongoing. The case before the Court is from Indiana, where one L. Jackson claimed that with 225 Standard Grocery Co. stores, he was paying a license tax at a rate 1,800 times that of single store owners. New Farm Board chair. James Stone seen likely to maintain policies similar to departed chair. Legge.

Editorial: Sen. Borah's call for US to recognize Russia is similar to the Senator's inviting a pyromaniac into his home and telling him where the matches are. Sen. B. Wheeler (D, Mont.) says US will benefit greatly if Soviet 5-year plan succeeds, despite alarmist reports; increase in buying power would benefit US industry.

Canadian govt. activates restrictions against Russian imports, targeted against raw materials produced by Canada's leading industries including coal, lumber, etc.

Gov. Roosevelt says he believes unemployment insurance will be adopted throughout the country in the coming generation. Editorial by T. Woodlock: Trouble with most of the major unemployment insurance systems tried so far is that reserves have proved inadequate; as a result, govts. of England and Germany have been compelled to advance enormous sums to continue payments. It's apparent we don't have nearly enough information to set premiums for this insurance. Another issue is distributing burden of the necessary premiums; by fairness it should be distributed widely as possible, for example by adding the premiums to cost of products.

Editorial: US oil industry would benefit immensely from agreement to restrict production, but antitrust law stands in the way. Until Congress meets again, the "long-suffering small oil producer" can't hope for substantial relief. C. Ames, Texas Corp. VP, advocates change in antitrust enforcement rather than law, by which questions of possible violation “may be determined before, instead of after the event, so that business men who desire to obey the law can tell in advance whether their proposed conduct is or is not a criminal offense”; Congress should give some govt. agency the authority to make these determinations.

The Japanese Red Cross has taken note of some grim life expectancy statistics; men in Japan live an average of 42.06 years and women 43.20, vs. a US life expectancy of 49.86 for men and 53.24 for women. The Red Cross has opened an exhibit in Tokyo featuring educational material on diet, exercise, and clothing.

British army cost for coming year estimated at $199.7M, down $2.9M; air force $90.5M, up $1.3M; French air force $90M, up $7M.

US idea of installment buying has caught on with a vengeance in Poland; "even a pair of shoes is now commonly bought with a series of promissory notes." Many of these notes default when coming due, and courts have become clogged with the resulting cases.

Trading on Amsterdam Stock Exchange floor temporarily halted by knife fight; participants taken to hospital; stock prices unaffected.

Market commentary:

Market wrap: Stocks "acquitted themselves creditably" in short session. Opening brought continued selling in many sections, with US Steel hitting a new low on the current reaction, and Auburn again down sharply. However, selling dried up once accumulated overnight orders were absorbed, and rallying spread through the list; leaders quickly rose above Friday's closing prices, and utilities resumed their uptrend. Bond trading moderately active; US govts. dull, slightly lower; foreign govts. active, generally higher; corp. high grade steady, convertibles weaker. Commodities mixed; grains firm; cotton off moderately. Small sales of copper reported below 10 1/2 cents.

Week in review: Stock rally ran into resistance, with rails particularly weak, causing some concern over similarities with the false 1930 rally. Reaction thus far hasn't run beyond technical bounds; movements in next week will be closely watched. However, fundamental situation still seen favorable for long-pull purchase of standard stocks. Bond market featured very successful Treasury and NY City sales and strength in high-grade issues generally. Foreign bonds in particular rallied very strongly across the list. Speculative and convertible issues showed some weakness along with stocks. Money market slightly firmer, but it's believed this was due to temporary factors. Business demand for credit appears weak, and banks intent on liquidating both security and commercial loans. Fed. Reserve maintains large holdings of govt. securities. Steel continued slow improvement. Grains fluctuated narrowly close to season lows. Cotton declined moderately at week end. Silver up sharply on optimism regarding India; Chinese exports also reportedly picking up. Berlin stocks strong on more confident political tone.

Conservative observers cautious; advise against trading favorites; "more discrimination should be used now than ever before by those who desire to purchase."

Bears are expected to launch "further vigorous drives" after their success of last week; strength of support that comes in will determine results; it's encouraging that the Jan.-Feb. rally was accomplished without overall increase in brokers' loans, implying it was largely due to outright buying rather than marginal speculators.

Since start of Feb., brokers' loans have increased slightly while loans to non-brokers have declined. This may be a warning signal since non-broker loans are generally thought to represent smarter money; also, this pattern occurred during the spring 1930 rally. However, in late 1921 - early 1922 this pattern was followed by a strong stock recovery.

Bear forces were helped last week by some grim earnings news. Declining rail traffic and earnings led to dividend cuts and questions about safety of dividends at some major rails including NY Central. Leading steel cos. including US Steel and Bethlehem operated around breakeven for Jan. and Feb. This kind of news may cause considerable "flopping around" until earnings improve, but "main trend of stock prices should be upward over the greater part of the year." Conditions of marked uncertainty are typical at this point in the business cycle; bad news should disturb stocks less in this liquidated market. While upturn in profits may be postponed, important interests are confident next change will be upward; they should therefore come in to accumulate stocks on any sizable decline.

Broad Street Gossip: After strong rally starting the year, market was due for technical correction regardless of business developments; large part of decline due to short selling. Utilities are back in favor after adjournment of Congress. Not so many years ago, people were startled when a Congress appropriated $1B; now, little comment is heard about our $10B Congress. Total US wealth estimated at $350B, about 1/7 of which is in 24 of the largest corporations.

Editorial: While labor leaders have every right to take satisfaction from the relatively few wage cuts now compared to previous depressions, has it occurred to them that there may be cause and effect between high wage scales in construction and two-year decline in that industry?

Very strong demand for Treasury bond issue took bankers and govt. officials by surprise; the $500M 10-year 3 3/8% issue was oversubscribed about four times, and it now appears that in spite of the veterans' bonus commotion the bonds could have commanded a better rate. Some bankers anticipate inflation as a result of the financing, since proceeds will be paid to veterans who are likely to spend it; "whether such inflation will be of permanent benefit remains to be seen." F. Ryan, Nat'l Cash Credit Assoc. VP, estimates veterans will borrow $700M this summer, but about half will go to pay off personal debts; estimates total personal floating debt in US at $12.4B (includes debts to retailers, loans on insurance, personal loans, etc).

Economic news and individual company reports:

Dominick & Dominick note some disturbing long-term trends in state and local taxation. While Federal taxes declined from $4.905B in 1921 to $3.364B in 1928, state and local taxes increased from $3.933B to $6.095B, increasing the total annual tax burden by $621M. Much of the state and local tax bill is due to construction and essential services, which have grown in reasonable proportion to population; however, other spending has increased much more rapidly than either population or income. In addition, spending has outpaced even increased taxes, leading to a large increase in debt; net local govt. debt went from $7.264B in 1922 to $12.579B in 1928.

Conference of NJ state officials and bankers proposes legislation allowing for bankruptcy committee as only solution for North Bergen's tangled finances.

Some evidence is accumulating of “quickening pulse of the automobile trade” in the Detroit area, including reports from dealers and from rails serving the auto industry. A considerable amount of veterans' bonus money is reportedly going into cars.

Commerce Dept. reports $11B worldwide building program was set in motion in 1931 to relieve unemployment, with US accounting for two-thirds or more.

Fisher's wholesale commodity index was 76.0 vs. 75.8 prev. week, first increase since Dec. 5 week.

Youngstown district steel production to rise 2% to 50% this week.

Oil industry is cutting expenses drastically, and executives believe further immediate readjustment is needed; first quarter earnings will be poor. Okla. Gov. Murray asks Standard of Indiana to revoke oil purchasing price cuts; says state Corp. Commission has revoked increase in allowed production indefinitely. Standard of Indiana blames Okla. producers for selling oil more cheaply to their competitors; says can't continue to pay higher prices for oil; calls for fair and united action by all producers. New East Texas production gaining rapidly; for week ended Mar. 5 was 57,000 barrels/day vs. 33,900 Feb. 28 and 25,300 Feb 21. Union Oil of Calif. announces drastic cut in crude purchasing prices averaging 50 cents/barrel to below $1; other major buyers expected to follow.

Venezuela oil production in 1930 was 134.8M barrels vs. 136.6M in 1929.

Rails set an efficiency record in 1930, using avg. of 121 pounds of fuel to haul 1,000 tons (including equipment) a mile; this was 4 pounds under the prev. record.

Walgreens Feb. sales $4.146M, down 1.5% vs. 1930; National Tea $6.068M, down 10.7%; J.C. Penney $9.540M, down 14.8%.

J.I. Case another farm machinery company to report a sharp increase in notes receivable, up almost $6M to $21.9M at year-end.

Companies reporting decent earnings: Middle West Utilities, Foster Wheeler (engineering/power), Ulen & Co. (engineering/construction), Hershey Chocolate, Selby Shoe.

Movie:

Dishonored - Third collaboration between Marlene Deitrich and Joseph von Sternberg falls short of The Blue Angel and Morocco, but is nevertheless suspenseful and strikingly photographed; Dietrich plays the alluring X27, a spy sentenced to death for allowing an enemy officer to escape. However, while Miss Dietrich is remarkably effective as a movie personality, it becomes clear she's "lacking in technical finish as an actress"; main weakness is apparent inability to end a sentence with anything other than a question mark.

Jokes:

Scotsman 1 - That's a poor blade you've got on your safety razor. Scotsman 2 - Well, it was good enough for my father and it's good enough for me.

Teacher - What is your father's occupation? Boy - He's a worm imitator. Teacher - What do you mean? Boy - He bores holes in furniture for an antique dealer.

"'What is a baby?' 'Usually a peach, sometimes a lemon, now and then a pear.'" [get it? pear ... pair ... ]