March 26, 2010

Thursday, March 26, 1931: Dow 184.20 -1.80 (1.0%)

Assorted historical stuff:

Editorial: Nicholas Murray Butler recently noted the lack of leadership in political life, blaming it on our electoral system and concluding the best leaders were now to be found in science and industry. On the other hand, John Dewey recently bemoaned the "bankruptcy of 'industrial' leadership"; if both of these are correct, "we simply have no leadership anywhere." One explanation may lie in the observation of Alfred North Whitehead that "mankind is now in one of its rare moods of shifting its outlook," replacing the "mere compulsion of tradition" with a new vision of the world, with "elements of reverence and order" but based on "unflinching rationality." If this is what's going on, leadership may well be in upheaval for the moment; but perhaps "leaders of tomorrow are even now preparing to emerge from the crowd."

Turkish Pres. M. Kemal issues manifesto announcing govt. reorganization along Fascist lines.

Dr. C. Duisberg, Federation of German Industries pres., says reparations payments ruinous to both creditor and debtor nations, US could give world a new period of prosperity by writing down war debts. However, warns against hasty measures to cut debt; recommends campaign to convince US of need for readjustment.

M. Gandhi's truce with Britain faces test today as All-India Nationalist Congress votes on the agreement. Gandhi has faced some opposition from disgruntled nationalists; an angry mob gathered on his arrival in Karachi and had to be held back by police, and the "diminutive leader" was attacked with a flagpole by a former follower Wednesday. However, the Congress is expected to approve the truce, as loyalty to Gandhi should prevail. Troops were dispatched to Cawnpore to quell riots between Moslem and Hindu nationalists.

French Foreign Min. Briand says Austro-German agreement may be referred to League of Nations council. French foreign office announced Britain and France asked delay in union to allow council to consider the situation at session in May.

At European Union Commission meeting, Italy demanded admission for Russia to all future economic sessions; other delegates opposed. British Foreign Sec. Henderson said Britain would endorse economic federation but oppose any political union.

Washington report: “Vocal element among the farmers, talking through their powerful lobbying organizations,” will probably push for further relief measures at the next Congress in Dec. However, outcome is uncertain; farm conditions may improve before then, and the tax-paying public, facing a second large deficit, may be aroused by the huge amount already spent by the Farm Board. Finally, it's not clear what additional measures could be agreed on by farm groups and passed into law; the debenture [export bounty] has drawn warnings from foreign govts., while the equalization fee is opposed by the President and a sizeable chunk of Congress.

Editorial by T. Woodlock disputing charges made by Judson King that temporary govt. takeover of rails during the World War was necessitated by rail owners' “selfish effort to gain greater profits,” and that their return to private ownership after the war involved a large “raid on the treasury.”

Bell Labs television set now being demonstrated uses long known principle that eye retains image object flashed before it for about 1/8 second. The system transmits 90,000 tiny partial images/second, with 5,000 making up a complete image, so that 18 complete images are sent per second.

At a recent get together of Henry Ford, Harvey Firestone, and Thomas Edison, Ford was able to do six chin-ups in a row, but his old friend Firestone couldn't pull himself up once even with Ford spotting him. Edison begged off, probably a wise choice since he's 83 while Ford is 67 and Firestone 62.

US Steel has grown tremendously since being founded 30 years ago. It's therefore interesting to find statements by two of the founders at the time, Andrew Carnegie and Henry Frick, advising investors to stock with bonds rather than taking chances on common or preferred stocks.

Richest man in Lithuania is industrialist Richard Tillmanns, but more famous is the second-richest, Zionist enthusiast and beer king Isser Ber Wolff.

The 40.5M words emitted by the recently adjourned 71st Congress would be enough for almost 540 novels of average length.

Plan introduced in NY Assembly for new $1.2B underground passenger rail terminal in Manhattan between 4th-5th Ave. and 16th-23rd St.; to serve all rails terminating in metro. area.

Working on the new NY City building code, investigators recently discovered an 1833 law still in force, requiring a man to be placed in the cupola of the watch house at Delancey and Attorney Sts. each night, his job to look for fires and, upon spotting one, to ring an alarm bell and hang a lantern out the window pointing toward the fire to direct citizens and firemen.

Market commentary:

Market wrap: Rails continued yesterday's rally in the early dealings. Market turned irregular after Westinghouse announced dividend cut at noon; Westinghouse sold off sharply, while industrials pulled back; however, support came in after a brief period and the market turned up again, led by impressive advance in American Can; also strong were McKeesport Tin Plate, Union Carbide, and trading favorites including Vanadium and Worthington Pump. Bond market dull; govt. and highest grade corp. mostly steady but other issues showed declining tone; Australian bonds very weak. Commodities firmed; grains substantially higher; cotton only slightly lower in spite of heavy volume. Copper remained at 10 cents; foreign buying heavy in past 2 days after price was lowered to parity with domestic.

Conservative observers more cheerful, but still advise buying only on technical reactions and accepting profits on rallies.

Editorial: Huge wheat surplus the Farm Board holds presents a problem now that they've abandoned stabilization; selling it would cause prices to collapse. Sen. McNary suggests the Board could keep the surplus for as long as 3 years; this may be the best choice now but is still likely to cause a huge loss. Storage for 3 years would cost 54 cents/bushel; adding original cost of about $1 and delivery charges of 20 cents, the cost in 3 years at the Liverpool market would be $1.74 vs. a current price of 62 cents there. What the price will be in 3 years is "something that not even the seventh son of a seventh son and born with a caul could foresee," but only a huge crop calamity would generate a profit for the Board. This should reflect on any additional "wild-eyed plans" for farm relief.

Grain trading circles decidedly more optimistic since announcement Farm Board would follow hands-off policy in 1931; trading is more active; operators who formerly saw nothing but depression "are now talking general prosperity," and in many cases backing their talk up by buying commodities or securities. CBOT directors vote to restore wheat trading to the largest of the four grain pits.

Heavy issues of new bonds are expected in April and May.

Goodbody & Co. note chain food stores have maintained volume in 1930, though profits were crimped by declining prices; chains have gained many customers from high priced independent stores due to the depression.

Market observers, while cautious, believe technical situation is considerably better than 1930; many investors are carrying little or no margin, and professional bears admit their efforts have not been successful at provoking much liquidation. Some observers expect a dull summer for business, and believe this may depress the stock market; fall should give more definite indication of lasting business recovery. While Wall Street bulls believe wage cuts would delay recovery, some industrial leaders say they may be needed in some cases due to commodity declines.

Slowdown in steel production recovery concerned observers; may indicate peak in March at close to current levels, rather than in April or May as most expected.

Broad Street Gossip: Demand for gold mining stocks including Homestead and Noranda is highest in many years; “in Canada, the gold fever is at its height” with millions of US dollars being invested in Canadian gold prospects. The Old Timer believes bears have overstayed their market just as bulls did in 1929; he's never known bears to make big profits two years in a row. “The man who goes on the theory that the country never can recover from a business depression always is wrong. And on each recovery, new high records are made ...” The margin man at one large NYSE broker reports serious depression in his line; he didn't send a single margin call out last week in spite of a somewhat down market.

Dr. D. Friday, economist, predicts 25% rise in manufacturing by end of year over 1930 level, another 15% in 1932, and end of depression in 1933; believes increased production at lower prices will stimulate buying. “With the downward adjustments in costs, the economic balance of the business machine has been restored and it can run at full speed on the new and lower price level.”

Economic news and individual company reports:

Westinghouse cut annual dividend rate to $4 from $5. B. & O. cut annual dividend rate to $5 from $7.

Fed. Reserve reports Feb. industrial production increased slightly more than seasonally; index of production in most important industries was 85 vs. 82 in previous two months, and 107 for Feb. 1930. Factory employment increased slightly less than seasonally, and payrolls more than seasonally.

Farm Board chair. Stone says that wheat growers' actions this year will be important factor in determining how Board disposes of surplus. Defends last fall's stabilization operations as needed to protect market and banks from sudden drop to 50 cents. Another announcement says Board will start selling wheat Apr. 1 at 82 1/2 cents, raising the price 1/2 cent every 10 days.

Treasury to take first step to meet veterans' bonus cash requirements by issuing $100M of 90-day bills.

Steel production uptrend faltered; week ended Monday was 57% vs. 56 1/2% prev. week, 54% two weeks ago, 73% in 1930, and 94 1/2% in 1929. Weekly steel reviews report more mixed picture than in previous few weeks; steel mills are reporting both production increases and decreases, and finished product and scrap prices are likewise reporting mixed trends; sheet steel in particular (used by automotive industry) is showing weakness; consumers seem unconcerned with reserving future requirements. Machine tool demand uneven, but inquiries good.

US electric output for week ended Mar. 21 was 1,663 GWHr, down 2.3% from 1930, vs. a 3.4% decline prev. week and 4.8% two weeks ago.

Rail freight loadings have been improving somewhat vs. 1930; for first 2 weeks of Mar., decline was 16.9% vs. 1930, while the decline for Feb. was 19.1%; loadings for the Mar. 14 week were highest in 1931. Final plan for Eastern rail consolidation reportedly will be presented to the ICC soon. A number of rate revision cases are hanging over the industry as a result of recent ICC order; most result from the 1925 Hoch-Smith resolution directing ICC to investigate rates with view to granting farm products the lowest possible rates.

East Texas oil producers and land owners say will fight any curtailment orders in court.

Rubber declines to record low in London market after important Dutch producers quit restriction plan.

Large shipments of Soviet oil and gasoline to Sao Paolo, Brazil have resulted in dramatic price cutting; Russian gasoline sells for equivalent of 25 cents/liter, while US and British sells for 32 cents. Argentine Foreign Min. warns country will be unable to export wheat in a few years due to Russian competition; suggests govt. organization for selling wheat similar to that in Russia.

E. Theodore, Australian treasurer, calls for abolition of required gold reserve and shipment of gold for debt payments; says Australia through with gold standard. Australian bonds plunged; banking circles, who have steadfastly opposed the Labor govts. program of inflation, believe the proposal may lead to change of govt. Most other foreign currencies also declined, with marks particularly weak.

GE has invested extensively in foreign electrical equipment makers through its International GE subsidiary, which as of end of 1930 has $204.8M in investments and is represented in every country in the world except the US and Canada (where Canadian GE operates).

NY State savings banks agitated over apparent delay of bill to equalize their taxation with that applied to commercial banks.

Gen. Amer. Tank Car may raise dividend after fifth consecutive year of record income in 1930; extensive food transport operations should help 1931 earnings.

US chewing gum exports in 1930 were over 500M “sticks or slabs” valued at $1.438M, and sent to “practically every part of the globe.”

Companies reporting decent earnings: Federal Light & Traction, Omnibus Corp.


Appearing at the Palace - Debut of Dorothy Stone, singing and dancing star, is fresh and charming. Return of Vincent Lopez and his St. Regis orchestra; their new number is a modernistic jazz composition entitled Steel, "which tells a musical story of the importance of this metal in modern life." Burns & Allen contribute hilarity to the bill, along with "musical comedy baritone" J. Harold Murray.

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