Tuesday, March 3, 1931: Dow 184.38 -5.28 (2.8%)

Assorted historical stuff:

Editorial: Agreement by France and Italy on naval limitation for next 5 years bodes well for the future. “If the two most powerful continental nations are now to find amicable cooperation possible, the tendency of the past two years toward an alignment of European peoples into two hostile camps has certainly been checked and may have been finally ended.” Political uneasiness has long been a serious problem for the European and world economy; calmer relations would aid economies and allow less spending on “what is deceptively referred to as national security.” Reading between the lines, perhaps “Mussolini has relinquished his desire to fish in troubled Rhine waters” after “steadfast refusal of Hindenburg and Breuning to swallow his bait. Whatever the details ... better times for Europe, our best customer, are in the making.”

Dr. H. Schacht, former Reichsbank pres., says Germany unable to pay war reparations under present circumstances; nation's assets exhausted. Germany can make payments only if “allowed to earn”; other signatories of the Young plan should fulfill obligations. “Asked what he would do if he were dictator of Germany, Dr. Schacht replied 'I would cease reparations payments tomorrow.'”

European grain conference closes with "vague resolutions of goodwill."

Coalition of Patriotic Societies petitions Pres. Hoover for general embargo against Russia; says credit and technical aid is "helping build up the Frankenstein which is dedicated to our destruction."

Editorial by T. Woodlock: Gold standard may justly be called irrational, illogical, a relic of barbarism, clumsy, provocative of panics, inefficient, inconvenient, unscientific, antiquated, and unresponsive to present needs. However, the fact is "the world believes in gold ... until people cease to esteem gold as they now esteem it, gold will remain the only money that people will universally recognize and accept in any quantity."

Rep. Cooper (R, Wis.), oldest House member, dies at 80, leaving House with 217 Republicans, 216 Democrats, and 1 Farmer-Labor.

Washington report: Muscle Shoals opponents growing concerned on delay in Presidential veto; Pres. Hoover has issued statement interpreted as disapproving, but said engineering and business aspects are still under study. Opponents say the matter is a simple case of opposing a foothold for state socialism. Senator Glass and the State Dept. engaged in obscure dispute on the Dept.'s authority over Fed. Reserve's foreign contacts; significance uncertain. Prohibition battle expected at Democratic Nat'l Committee meeting Thurs. Congressmen are launching a final flurry of relief measures with no hope of passage, allowing them to gain some credit for battling down to the last minute when they get home.

L. Wakefield, First Nat'l Bank of Minneapolis pres., hits politicians who capitalize on discontent by attacking corporations; “They delight in the pretended role of a David attacking the Philistines and demand the applause due both the hero and the martyr”; corporations are vulnerable because they have no vote, but real victim is the stock, bond, and insurance policy holder.

Italy facing wine crisis as beer has largely replaced it in popular favor since the war.

Number of applicants to immigrate to the US from Scotland has declined from 33,000 a year ago to none now; reports of unemployment blamed.

Over 15M radio receivers were in use in US homes as of Jan. 1; retail sales of radio equipment in 1930 were $500.9M vs. $842.5M in 1929.

West & Co. in Philadelphia installs first automatic electric stock quote board outside NY to be operated directly from NY.

NY City water supply experts to confer on advisability of raising water rates, which hasn't been done since 1857; will also consider using river water for firefighting and street flushing.

Henry Morgenthau Jr., Conservation Commissioner , says Adirondack State Park to become largest state or national park in the US with enactment of Hewitt bill to add 1.6M acres, for total of 4.6M acres.

GE constructing 900,000 volt X-ray tube for experimental treatment of cancer; has taken several years to build, will start operation in April.

Ford salvaging plant at Dearborn has processed 50,000 old cars of all makes since starting operations a year ago. Over 21,500 tons of steel were salvaged, in addition to tires, glass, batteries, floorboards, upholstery, etc.

Market commentary:

Market wrap: Stocks opened strongly on accumulated buy orders, but became irregular about noon, starting in the rails; selling broadened to industrials in mid-day following poor US Steel Jan. earnings report; decline picked up steam and spread to leading utilities and the general list in the afternoon. Investment grade bond market generally firm on favorable reception for $1.4B Treasury financing; speculative and convertibles reacted mildly in sympathy with shares. Commodities weak; grains generally down; cotton off moderately. Copper price remained at 10 1/2 cents, buying mostly foreign.

Conservative observers continue recommending sidelines until "market has demonstrated its ability to absorb offerings and hold steady."

Bears were reportedly active; some selling also attributed to stop-loss orders whose limits were hit.

Trading favorites including Vanadium were under severe pressure in the afternoon break, though Auburn closed with a gain. Anaconda Copper now subject of contest, with important interests buying but bears active. Pools reportedly operating in Lima Locomotive and Superheater.

NY Central led early break in the rails with a continued sharp decline following last week's poor Jan. earnings announcement; Atchison also down sharply.

W. Storey, Athison RR pres., says costs have been cut close to minimum needed for maintenance; early 1931 results to depend on traffic trend.

Editorial: Cotton figures for 1930 show decline of 2.053M bales in world consumption of US cotton. Decline was partly due to depression, but consumption of Indian cotton increased 1.1M bales in spite of it. Only way for the US to reclaim its share of the cotton market is to lower costs and improve quality.

Broad Street Gossip: “Unless history stops repeating itself,” it won't be long before the depression will be spoken of as a past event, and it will be soon after that talk of prosperity is resumed. Some time later, when industries again produce more than people can consume, talk of a depression will be resumed. “That is the cycle which has been followed for the last half century.” Currently, industries that have progressed furthest in stabilizing production are most successful. This depression may have awakened “captains of industry” to the evils of overproduction and reckless competition; “consequently, a new system may be developed in industry within the next few years.” Corporate balance sheets are much stronger than in the depression ten years ago; many were borrowing large sums at 6%-7% then; now funds are available at 2% but debt is much lower. Bank and trust earnings expected to improve as money rates increase along with business recovery.

Conservative economists look to rise in grain markets as important factor for stocks; could occur through effective cartel agreements or crop failures.

Clark, Childs & Co. note wide disagreement between bears dismissing recent rally as technically driven and bulls seeing similar pattern to 1920-21 market, "in spite of the fact that the market never follows a previously laid out pattern for any length of time." High degree of skepticism is healthy technically. See many fundamental reasons for confidence in market though it may go through a period of consolidation following recent strong gains. However, don't believe serious break is likely; "We lean strongly to the opinion that current prices represent an investment opportunity such as is not apt to be presented again for some years to come."

H. Bancroft, Dow Jones publisher, says recent strength in markets indicates upturn in business likely before July. Thus far, business has definitely improved over Dec., but hasn't yet reached normal seasonal improvement. Business hasn't yet hit bottom but is close; wouldn't be surprised if markets had already passed bottom.

Sen. Smoot defends 1930 Tariff Act as needed to save US producers from being overwhelmed by cheap foreign goods at a time of surpluses in almost everything; “The current of international commerce indicates the good judgement of Congress.”

Economic news and individual company reports:

C. Thompson, Northwest Bancorp. VP, says its group banking system was formed to combat high number of bank failures in their territory in past 10 years, leading to lack of confidence and loss of business to other areas.

Steel industry showing some troubling signs; first two months haven't come up to hopes at start of year. Buying is now below production; operating peak for the first half may come this month. Few producers are covering dividends. US Steel earnings from operations in Jan. were only 10 cents/share. S. Hopkins, Bethlehem Steel shareholder, sues for access to stockholder list so he can "circularize" stockholders in opposition to executive bonus plan.

Capital outlay by class 1 rails in 1930 was $872.6M, up $18.9M from 1929 and largest amount since 1926.

Upcoming Treasury issue well-received in bond circles; rates of 1 1/2% - 3 3/8% indicate veterans' bonus hasn't caused much firming of rates, though general opinion is that if not for bonus agitation a much larger part of the offering could have been long-term, possibly at a rate closer to 3%.

GM production schedules in March point to 20% increase over Feb.; dealer sales for first quarter are likely to be about 300,000, or 20% below 1930 level, better than the 30% industrywide decline expected by most observers.

Report of Sen. Capper's (R, Kan.) committee finds alarming movement toward monopolistic control of nation's food, particularly bread and milk, by small group of powerful corporations. Recommends FTC and Justice Dept. look into rapid consolidation of the industry. See some evidence of restraint of trade, but not enough for a conclusive finding.

Farm Board agents engaged in supporting wheat are having increasing difficulty finding storage space for purchases.

European govts. and central banks said studying British scheme for international credit institution to help transfer capital where needed.

World gold output in Jan. was 1.757M ounces vs. 1.674M in Jan. 1930, and highest monthly total in past two years other than record 1.771M in Dec. Canada now threatening US for position of second-largest producer.

Canadian report: Survey of 7,431 firms shows total employment of 904,315 on Feb. 1 vs. 913,080 on Jan. 1. Business failures in 1930 were 2,402 with liabilities of $48.2M, vs. 2,167 with liabilities of $38.7M. Rail freight loadings for year up to Feb. 21 were 364,636 vs. 442,001 and 476,853.

NY Trust notes growth of US-Canada trade over past decade; Canada supplanted UK as main US trade partner, and US became Canada's largest creditor.

Poland has trade surplus in 1930 for first time since 1926; imports 2.246B Zl, exports 2.433B. Main trade partner is Germany.

1930 earnings reports: Union Pacific about $15.60/share vs. $20.36; Johns-Manville $3.66 vs. $8.09; Reynolds Metals $2.31 vs. $4.63; Bucyrus-Erie $1.63 vs. $3.17; Electric Storage Battery $6.22 vs. $8.77.

Montgomery Ward reports Feb. sales down 17.1% from 1930; Sears-Roebuck sales for 4 weeks ended Feb. 26 down 14.8%.

Companies reporting decent earnings: Standard Power & Light, American Stores, City Ice & Fuel, Adams-Millis (hosiery).

Movie:

Honor Among Lovers, with Claudette Colbert, Ginger Rogers, and Fredric March. "Semi-sophisticated, semi-melodramatic, semi-amusing" film of love and financial trickery, filmed in "those sumptuous modernistic settings seldom seen in contemporary life outside of the movies."

Lots of jokes today:

'I thought you said Bill was a man of regular habits.' 'He is.' 'But he was drunk last night.' 'Sure - that's one of his regular habits.'

'Why are you running so?' 'I want to prevent a duel between two married men.' 'Very praiseworthy. Who are the men?' 'My neighbor and I.'

"Young Wife - I learned to cook while my husband was abroad. Mother - Well, and what did he say when he returned? Young Wife - He went abroad again."

Reports from the Geographic Society meeting on elephants: Ireland - Fighting Elephants; France - Les Amours de Elephans; Germany - Science of Elephant Hunting; Poland - Elephants and the Polish Question; US - A Plea for Bigger and Better Elephants.