March 7, 2010

Saturday, March 7, 1931: Dow 179.73 -4.96 (2.7%)

Assorted historical stuff:

While the active govt. and private efforts to relieve unemployment in the current emergency are the stuff of front page news, it's less well known that a nonpartisan committee of 15 eminent figures from various fields has been making a long-term study of the problem. The body, known as the Committee on Recent Economic Changes, was set up by the President during the last depression in 1921; members include William Green, John Raskob, Eugene Meyer, and Owen Young. The Committee's fact-finding organization, the Nat'l. Bureau of Economic Research is getting help from many other govt. and private sources to put together a statistical picture of a full economic cycle. The idea is not to develop a system of rigid economic control, but to painstakingly start to develop an understanding of economic actions and reactions, to be applied by all in their own fields. Editorial: It's reassuring that this undertaking "which so many fervidly demand" has already been underway since 1921 with a group of such unquestionable qualifications, and that it has shunned publicity, preconceived doctrines, and extravagant promises.

Washington report: J. Raskob, while new to politics, seems to have a clear vision of where the Democratic party should go. In particular, he sees Republicans suffering badly from lack of organization and radical elements running wild, and by contrast is aiming for a coherent and efficient Democratic organization less under control of extreme elements. While Sen. Smoot's statement that a tax increase won't be needed next year was encouraging, test of this must await mid-March when returns are filed. It was good fiscal policy not to raise taxes this year in spite of the $500M deficit, but to continue running deficits would be another matter. Pres. Hoover will leave Washington for his first extended vacation since taking office; many govt. officials are likely to follow, leading to “good old fashioned Washington summer” when all but routine business is postponed; country may find this a rather welcome prospect. Glass financial inquiry will meet privately to draw up a tentative bill before hearings are resumed in the fall.

Indian truce seen benefitting both cotton industry and world trade in general. However, full details of the agreement haven't been announced, and road to establishment of new home-rule govt. “is strewn with pitfalls.” In addition, the agreement calls for raising duty on imported cotton cloth 5%, and it appears peaceful persuasion against buying of British cotton may continue.

Revolutionary leaders in Southern Peru agree to accept new govt. set up by Lt. Col. Gustavo Jimenez after he led troops into Lima and overthrew provisional govt. of Chief Justice Ricardo Elias.

Despite hard times, Turkey has begun construction of largest bridge in Asia, 488 feet long spanning the Euphrates River at El-Aziz.

Report from Argentina charges that the Prince of Wales and Prince George, on their recent South American tour to support British manufacturers, smoked exclusively American cigarettes.

Editorial urging end of the "tenant farming" system as practiced in the "old South," largely with black croppers growing cotton on a few acres, some plowing with a single mule. It would be economically sounder to operate farms as a unit with wage-earning farm hands, and introduce machinery and more diverse products.

As long expected, Farm Board chair. Legge resigns; Pres. Hoover appoints J.Stone, tobacco member of Board as new chair.

Some shrewd ex-servicemen now on Wall Street have been spotted taking the loan on their veterans' bonus at 4 1/2% and investing it in good stocks paying 6%.

Great Lakes Aircraft receives contract for 32 “bombing planes” from US Navy, to cost about $1M.

Agriculture Dept.'s successful "4-H Club," started to make farm life more attractive and prevent youths from migrating to overcrowded cities, has lately been adopted in Cuba, including organization of rural clubs for boys and girls similar to those in the US.

NY State Legislature considering bill to aid NY City transit co. unification; bill seen likely to pass as Mayor Walker makes speech citing crisis facing city with 8th Ave. subway nearing completion and desirability of avoiding direct city operation of that line.

John D. Rockefeller, Jr. forms organization to build “Radio City” between 48-51 St. and 5-6 Ave. in Manhattan; work on 68 story tower to begin May.

Market commentary:

Market wrap: Stocks were firm early, with utilities pushing ahead. "Pronounced unsettlement" developed about 11AM, starting with sharp breaks in some trading favorites including Auburn; selling spread to major industrials, rails, and oils. Attempted rally in early afternoon gave way to another wave of selling in the last hour, with the downward move picking up momentum and even utilities giving way. Bond market active, prices strong; US govts. firm on light trading; foreign govts. bouyant, with sensational move in S. American; corp. high-grade strong, while speculative and convertibles reacted with stocks. Commodities soft; grains down slightly; cotton off substantially. Copper unchanged at 10 1/2 cents, with little buying. Silver continued upward to 28 1/2 cents.

Conservative observers disappointed at yesterday's action; now advise taking any opportunities to reduce long positions and not buying until “it has been demonstrated that a new trading range has been established.”

Unexpectedly strong success of large Treasury and NY City financings has buoyed bond market generally, and municipals in particular; Dow avg. of 20 municipals is down to a 3.92% yield vs. 4.01% two weeks ago, while the just issued NY City 4 1/4% bonds are down to a 4.05% yield.

Berlin stocks strong in past week, reaching mid-Nov. level.

Weakness in oil stocks attributed to reports of price cutting.

US Steel unfilled orders, to be released Tuesday, expected to show a decline based on relatively small buying in Feb.

Bank statements show no material improvement in business; little commercial demand for credit seen, whereas commercial loans should normally be increasing in preparation for spring business. Fed. Reserve banks continue holding abnormally high $600M in govt. securities, preventing general bank credit from declining unduly. Decline of $8M in brokers' loans was less than expected considering past weeks stock market reaction.

Broad Street Gossip: Business news is a little better, though no lines have shown big gains. Copper, steel, autos and textiles all report some improvement. Sentiment, however, is 100% better than a few weeks ago, and this is bound to help business if it continues. Steel industry is growing because of new applications, such as "stainless steel" that has a gloss so perfect it can be mistaken for polished sterling silver. One reason for the sensational decline in silver may be that industry's laxity in finding new improvements, such as the non-tarnishable silver recently perfected by International Silver. "Good ground exists" for belief some steel prices will be advanced shortly.

Economists encouraged by better political news from India and Europe (French-Italian agreement), though China remains a sore spot.

Baker, Weeks & Harden note bull-bear dispute on whether recent rally will last. Believe end of fear that was dominant in Dec. has improved spending on clothing, cars, furnishings, and other semi-luxuries; also see slight improvement in building. Too soon to tell if business improvement will become strong in late spring or “if we must wait until autumn for an approach to really good business.” Given public confidence and good market technicals, stock buying will probably come before strong business recovery.

AFL monthly business survey: no sign yet of general uptrend, but increasing activity in many industries; rise in unemployment apparently checked, but drastic wage cuts have occured; “seems likely ... we are at or near the bottom of the depression”; next few weeks to show if revival starts in spring or is delayed several months.

Economic news and individual company reports:

Bradstreet's weekly review reports continued slow but steady improvement in wholesale and retail trade; some of gain may be due to a month of unusually mild weather. Dun's reports continued “undercurrent of better feeling in various quarters,” though improvement is irregular and business failures unusually high.

NY banking superintendent Broderick denies reports he has approved Rosoff plan for reorganizing Bank of US; however, he's expected to give his opinion on the plan this week. M. Steuer says has communicated with lawyer for Mr. Kugel, former bank VP, who denied reports Mr. Kugel was raising $10M from bank directors to help in reorganization.

Glass committee receives report from Comptroller of Currency blaming Nat'l Bank of Kentucky failure on excessive loans to Rogers Caldwell and associates, with bank stock as collateral. Bank officer conduct was first criticized by the Comptroller in 1925.

Market value of all NYSE-listed stocks Mar. 1 was $57.1B vs. $52.1B Feb. 1, $70.8B in 1930, and $71.9B in 1929.

State financing board says Fall River, Mass. [recently defaulted on loans] must cut salaries of all officials from mayor on down, cut all frills from every municipal department, and collect overdue taxes for 1930 and preceding years.

Oil & Gas Journal reports in spite of general curtailment in oil industry, oil refining had a record year of expansion with 26 new refineries put into operation, bringing total to a record 388; in addition, many existing refineries were modernized and had their capacity expanded. Texas Gov. Sterling sends telegrams to Pres. Hoover and John. D. Rockefeller, Jr., warning that Standard of Indiana's drastic crude oil price cut may ruin mid-continent oil industry. As expected, cos. in several other areas followed the Standard of Indiana price cuts. Standard of Calif. cut gasoline prices 2 cents/gallon for third time in 10 days.

Italian govt. vigorously denies reports French-Italian naval agreement will be followed by $100M private French bank loan to Italy; says new external loans would be contrary to govt.'s plan for economic rehabilitation.

Spanish currency depreciation sharply reduced trade deficit, from 629M pesetas in 1929 to 148M in 1930; “while this method undoubtedly has a salutary effect upon the trade balance of a country, it is hardly to be recommended by sound economists”; trade gain is offset by wide fluctuations in currency value not regulated by ability to ship gold; efforts now being made to return Spain to gold standard.

Negotiations for Romanian loan successfully concluded in Paris; amount cut to $26M from $40M; French, Swiss, Swedish, Czechoslovak interests participate.

Mexico decrees embargo against all foreign wheat.

Detroit employment index on Feb. 28 was 81.2, vs. 78 on Feb. 15, 76.5 on Jan. 31, and 106.5 on Feb. 15, 1930.

Hog prices have declined steadily through winter killing season; avg. price at Chicago week of Feb. 28 was $6.89 vs. $6.92 prev. week and $10.76 a year ago.

Total Massachusets debt as of Dec. 1 was $62.124M, down $119,450 for the year.

Manhattan new building permits for first 2 months were $21.5M vs. $25.1M; improvements $7.5M vs. $4.8M.

Company reports since Jan. 1: 186 companies reported higher earnings vs. 1930 and 741 lower; 712 dividends unchanged, 40 increased, 143 cut.

Companies reporting decent earnings: Providence Gas, RKO (movies).


Give Me Yesterday - Bittersweet play by A.A. Milne on the price of success. R. Selby Mannock, MP and cabinet member, has waged a carefully planned 20-year campaign for political success, including marriage to a woman of importance useful for his political intrigues. A chance encounter with a boyhood friend who remarks "success has closed in" on Mannock is followed by a return to his hometown to make a speech, where he sees his childhood sweetheart sitting in the garden as he's always remembered her. Shaken, he decides success has meant sacrificing too much and decides to go away with her. Returning to London, he resigns his cabinet post. However, this is taken as a wily political ploy and the PM offers him the post of Chancellor of the Exchequer. At length he decides to accept the position of more power, but bitterly, and with longing toward his lost youth. Play contains some of Mr. Milne's inimitable whimsy, including a dream scene in which youth and maturity fight it out.


Young Man at the Lunch Counter - I'd like a couple of hard-boiled eggs to take out. Waitress - You'll have to wait. Mamie and I don't get off until ten.

Poem submitted by writer - 'Why Am I Alive?' Response by editor - 'Because you sent the poem by mail, instead of delivering it in person.'

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